Billionaires are allowed to pay for people to sue their enemies

One of the weirder court cases in recent memory became even stranger this week when news broke that Hulk Hogan’s lawsuit against Gawker was being secretly funded by Peter Thiel. The Silicon Valley billionaire is best known for co-founding PayPal, funding Facebook and holding libertarian political views. But his long-running hatred for Gawker is no secret, either.

The outsize influence of rich people and organizations has been top of mind recently, between Bernie Sanders’s critique of modern campaign funding and the controversy over whether Facebook suppresses conservative viewpoints. These are big, systemic questions. By contrast, Thiel’s vendetta against Gawker is uncomfortably personal. His beef with Gawker dates at least to 2007, when the website outed him as gay. Hogan's lawsuit similarly accused Gawker of treating his private life as news—in this case by publishing a video of the former wrestler having sex with a friend's wife. By quietly backing the lawsuit, which ended in a $140 million jury verdict, Thiel has left the impression that his real aim is to put Gawker out of business as vengeance.

There's no question that Thiel is allowed to pay someone else’s legal bills, says Clay Calvert, the director of the Marion B. Brechner First Amendment Project at the University of Florida. Nonprofit organizations often work pro bono for individuals who want to take on institutions with ample financial resources, he notes. “He’s entitled to fund this, and the lawsuit was obviously not frivolous,” he said. “Hogan won in front of a jury.”

Calvert says that ethical questions would arise if Thiel was surreptitiously pushing legal action against a competitor to gain a commercial advantage. So-called litigation finance, where investors help fund a lawsuit in exchange for a portion of the potential winnings, has also been controversial. But the problem of rich guys funding lawsuits to satisfy personal vendettas doesn't lend itself well to policy solutions, Calvert argues.

Amy Adler, a professor at New York University who follows First Amendment issues, says she’s torn by the Gawker case in general, and the revelation about Thiel specifically. She points to the decision by Hogan’s lawyers to change their approach so that Gawker couldn’t pay a settlement through an insurance policy. This increased the threat to Gawker’s existence, even while potentially lowering the financial upside for Hogan, whose real name is Terry Bollea. “It seems irrational unless your goal is to shut down a news organization, if you can call Gawker a news organization. That’s what worries me,” Adler said. She added that Thiel could have pursued a legal claim against Gawker if he felt personally wronged.

Any fallout is likely to be indirect. Awkwardly, Thiel has been a significant donor to the Committee to Protect Journalists, although the group says he hasn’t donated in several years. Joel Simon, the organization’s executive director, said in a statement that it supports people’s rights to sue news organizations for defamation. “However, we do not support efforts to abuse the process by seeking to punish or bankrupt particular media outlets,” he added.  

Thiel also sits on Facebook’s board. The social network, which has been working hard to repair any damage done to its image as a neutral arbiter of information, was recently dragged into an awkward situation when board member Marc Andreessen (whose venture firm has received funding from Bloomberg News owner Bloomberg LP), suggested that India would be in better shape if it were still a British colony. Facebook hasn’t commented on Thiel’s involvement in the Gawker conflict. But it’s a fair bet to say the company would have preferred to stay far away from this one.