Hey, Read This: Peter Thiel v. Gawker


Peter Thiel decided to revenge-bankroll a lawsuit against Gawker, and the media freakout is real and well worth reading.

Welcome back to Hey, Read This, the column feature where we talk about the Things You Should Be Reading.™

This week, we’re reading the media frenzy surrounding the revelation that Peter Thiel, a Silicon Valley billionaire who has harbored a grudge against Gawker Media since it outed him as gay in 2007, has funded at least three lawsuits intended to put the company out of business.

The ensuing discussion touches on the role of money in the justice system, the ethics of outing, and the regulation of the burgeoning field of litigation finance.

So, what’s the reading list?

1. The revelation

Forbes broke the story, but it was the New York Times interview with Thiel that really set off the controversy. In it, he explains his motivation for the $10 million investment in Gawker's downfall:

"I saw Gawker pioneer a unique and incredibly damaging way of getting attention by bullying people even when there was no connection with the public interest."

He defended his actions as "one of my greater philanthropic things that I’ve done" and dismissed arguments that the case is a blow to freedom of the press:

"I refuse to believe that journalism means massive privacy violations,” he said. “I think much more highly of journalists than that. It’s precisely because I respect journalists that I do not believe they are endangered by fighting back against Gawker.”

The Times quotes Roy D. Simon, a professor emeritus of legal ethics at Hofstra University School of Law who normally supports so-called "litigation finance" as a way for Davids to fund their crusades against Goliaths, as having concerns with this particular case:

"I guess that one guy is much more likely to have an agenda driven by revenge or personal dislike or wanting to prove a point."

In contrast, the Times also quotes a University of Miami School of Law professor who thinks that the source of funding for a lawsuit is wholly unrelated to the substance of the case:

"If you really do have concerns about the merits of this case, finding out who bankrolled it doesn’t really help you at all."

2. The response

Once the identity of Gawker's secret antagonist was public, the founder and Managing Editor, Nick Denton, published a response in the form of an open letter to Thiel, and it was brutal:

The world is already uncomfortable with the unaccountable power of the billionaire class, the accumulation of wealth in Silicon Valley, and technology’s influence over the media.

You are a board member of Facebook, which is under congressional investigation after our site Gizmodo reported on the opaque and potentially biased way it decides what news sources are seen by its billions of users.

Now you show yourself as a thin-skinned billionaire who, despite all the success and public recognition that a person could dream of, seethes over criticism and plots behind the scenes to tie up his opponents in litigation he can afford better than they.

Denton ends with an acknowledgement that the parameters of this battle will be defined just as much in the press as in court—and boy howdy has that turned out to be true.

3. The dilemma of "outing"

At the heart of all of this is Thiel's conviction that Gawker is the kind of unethical, sensational media organization that should not exist—because Gawker published that column almost ten years ago titled: "Peter Thiel is totally gay, people."

But David Lat at the Washington Post doesn't think the crime matches the response:

The idea that Thiel is getting revenge for having been wronged, that Gawker’s original reporting on him was just another example of the same bottom-feeding impulses that drove the Hogan post, might sound reasonable at first. But objecting to a report that a man’s friends and colleagues all knew was gay sends a pernicious message that has nothing to do with tabloid journalism, the power of billionaires or free speech. There’s nothing shameful about being gay — but the idea that Gawker committed a grievous sin in “outing” Thiel and that it deserves to pay dearly, perhaps with its very existence, implies that there is.

For Marc Randazza of CNN, it's not so simple:

Thiel is willing to do what it takes to protect what little privacy we have left. Remember, his vengeance is not aimed at Gawker for writing a mean opinion about him, it is for invading his privacy. Thiel had the right to choose how and when he came out as gay, and Gawker took that away from him.

4. The question of third parties

For Vox's Timothy B. Lee, the issue of Gawker's journalistic integrity is beside the point:

In court, Hulk Hogan's lawyers sought to portray Gawker as an organization without a moral compass. It wasn't a hard argument to make. [...]

Even if you think Gawker stepped over the line in publishing the Hogan sex tape — and personally I do — there's still a lot of reason to worry about the prospect of wealthy people using lawsuits as a weapon against people they don't like.

Lee discusses other, similar cases where (most of us would agree) the news organization in question didn't "deserve" to be targeted the way that Gawker arguably does—namely Republican donor Frank VanderSloot's crusade against Mother Jones.

Importantly, Lee argues, we did this to ourselves. It used to be against the law for third parties to finance litigation, but those laws were loosened, and for good reason:

This was driven in part by the rise of public interest litigation — think, for example, of an environmental group finding a third-party plaintiff to sue a company to stop an environmentally sensitive development project.

But now, it seems, the deregulation has gotten away from us, creating opportunities for abuse:

Wealthy people can use this kind of third-party lawsuit to inflict harm on publications that anger them whether or not their lawsuits ultimate prove meritorious. And that, in turn, will put pressure on publications to tread lightly when reporting on wealthy people.

5. The heart of the matter

Which brings us to the substantive issue at play here. Thiel claims he wasn't funding the Gawker lawsuits as a business investment, with the goal of earning a large return from awarded damages—seeing Gawker go out of business is reward enough for him. But many billionaires are now doing exactly that, and such transactions present a lot of questions about our legal system and who has access to justice.

Mattathias Schwartz published a prescient article on litigation finance in the New York Times Magazine in October of last year, and it's worth returning to in the light of this newest controversy:

It lies at the crossroads of two Anglo-American tendencies. The first is our litigious side, in which we celebrate our equality before the law by dragging those who have wronged us before a judge. The second is our ingenious mercantilism, as demonstrated by our penchant for turning everything from church raffles to mortgages into marketable securities to be chopped up, bundled and resold.

At their heart, litigation finance investments are designed to allow poorer, smaller parties to sue richer, larger ones—and, of course, to generate profits for those willing to risk their capital on these legal pursuits. The potential problems, though, are manifold.

First, investing in litigation is a different from other forms of investment:

[C]reating lawsuits is not the same as creating something like [a machine]. Litigation is a zero-sum industry — every dollar in damages taken home by the winner, minus fees, must be wrung out of the loser

Secondly, litigation has a purpose other than securing damages for the plaintiff that can then be split with investors:

Litigation also helps shape legal precedent, defining the terms under which civil justice may be sought. It’s hard to imagine how billions in outside capital won’t wind up changing the justice system.

And lastly, when the problem of legal access is already so acute that "small" companies like Miller UK require tens of millions of dollars in outside help just to present a winning legal argument, is the best solution really to infuse legal battles with ever-more cash?

There, now don’t you feel a hundred times smarter?

Happy reading, and drop us a line in the comments to tell us about what (else) you’re reading this week.

Jacqui is a terrible dinner party guest—she only knows how to talk about politics and religion. On a typical Friday night, she can be found binge-watching her current Netflix show of choice, playing Civilization: The Board Game and drinking <$8 bottles of champagne.