How Peter Thiel's "Revenge Litigation" War Against Gawker Could Backfire Big Time

Peter Thiel - Getty - H 2016
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Peter Thiel - Getty - H 2016

So it turns out that Peter Thiel is the Bobby “The Brain” Heenan in Hulk Hogan’s fight with Gawker.

The Silicon Valley billionaire, who co-founded PayPal and provided early funding for Facebook, has been nursing a grudge against the media company that outed him as gay in 2007 and has been secretly funding litigation against Gawker, including Hogan's lawsuit that resulted in a $140 million trial verdict. After confirming his behind-the-scenes role to The New York Times, Thiel has become quite a heel to those in media who find it unimaginable that a rich guy could mess with their liberties. It's one thing to invest in a "disruptive" tech company that convinces publishers to house their content on a third-party platform that dictates what's trending (and struggles with copyright issues). And if Thiel wants to donate to a presidential candidate who wants to "reform" libel laws, that's Thiel's constitutional right. But to be so diabolical as to target a news operation like Nick Denton's version of D-Generation X, he should ready himself for a tweet storm from pretty much every journalist out there.

But hold on — are we really sure that Thiel is a genius?

Thiel didn't invent litigation finance. There are quite a few entrepreneurs out there who will provide the money for personal injury lawsuits, class actions and patent trolling. He's hardly the biggest purveyor of this sort of thing, either. At best, Thiel is pioneering a new breed. One columnist calls it "revenge litigation," likening Thiel to "the Charles Bronson of legal-centric investment capital." One could easy imagine that Hollywood celebrities who are frequently being gossiped about in the press could lend themselves as proxies in similar campaigns of spite.

Except Thiel insists he's not out for revenge.

He tells the Times that he considers his financial backing of cases against Gawker to be “one of my greater philanthropic things that I’ve done" and that “it’s less about revenge and more about specific deterrence.”

Here's the trouble with that approach: Thiel might have gotten a bit lucky thus far, and it's hardly certain at all that the ultimate outcome will be what he desires.

In some respects, Thiel made his own luck by stumbling upon Florida Circuit Judge Pamela Campbell, who provided Gawker no favors in deciding what evidence a jury could hear in its defense against Hogan's privacy claims over the posting of a sex tape. No doubt that Gawker shot itself in the foot, too, but Hogan's trial victory was certainly aided by a judge who displayed her true feelings about the American media with the comment yesterday, "I don’t like looking at all the stuff that’s published out there. It’s not healthy."

The question now is whether Thiel's luck continues when an appeals court looks at the Hogan case overseen by the most reversed judge in Pinellas County. Because as most lawyers will tell you, trial verdicts send messages, but appellate opinions create precedent.

In the same forum that Gawker overcame a preliminary injunction on the posting of the sex tape and was able to unseal evidence from this Hogan case, Gawker will now be seeking to strengthen First Amendment protections from privacy and publicity right violation claims. Should it prevail, that could mean that media outlets have an even freer hand in deciding what's newsworthy. And there's a good argument to be made that such an outcome could lead to even more privacy-intrusive stories. After all, with lawsuits against media outlets still rare enough to be chalked up as the cost of doing business and with prior restraints on speech frowned upon by judges, it's not lawsuits per se that stop meddlesome news organizations from pushing the boundaries. Rather, it's ambiguity in the law that often causes self-censorship. The Hogan verdict may embolden plaintiffs and cause a chilling effect on journalists. On the other hand, some clarity on the law from a higher authority could have the opposite impact.

The appellate decision to come hardly is projectable with any degree of certainty, but the point is that if deterrence is Thiel's ambition, he still has a ways to go before locking down his legacy and proving that his $10 million or so couldn't have been better spent lobbying for tougher privacy laws. The history of jurisprudence is littered with all sorts of cause-based endeavors — everything from efforts to overturn Obamacare to letting monkeys have the rights of authors — ending badly for those funding legal campaigns.  

Maybe Hogan could indeed emerge a winner, and Thiel will fulfill his goals. But before everyone in the media goes too nuts, it's worth acknowledging the decent possibility that Thiel could ultimately produce something that would be a gift to the Nick Dentons of this country now and far into the future.