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How Peter Thiel Killed Gawker

Peter Thiel steamrolled Gawker — and laid bare the big-money bias of the American legal system.

Might makes right. That’s the lesson Peter Thiel, a revanchist fanatic, taught us all when he used his personal wealth to finance the proxy war that obliterated Gawker.

The $140 million judgment, owed to plaintiff Terry Bollea (better known as Hulk Hogan), forced Gawker Media to hold a bankruptcy auction. Univision acquired six of Gawker’s sister-sites and permanently shuttered the flagship blog.

Gawker’s demise is rooted in the contradictions of the American legal system, where attorneys — who, like everyone else, want to get paid — are responsible for establishing citizens’ and corporations’ rights and responsibilities in court.

Peter Thiel’s ability to bankroll the Bollea suit illustrates by counterexample how the system is stacked against those who don’t have vast resources to pay teams of lawyers.

Skewed Justice

The mechanics of civil suits often confuse non-lawyers, a fact that industry groups have capitalized on to spread misinformation about the process. They claim that litigation functions like a lottery, where justice is meted out randomly and without justification, where robbers sue their victims for injuries, aunts sue nephews for hugging them too forcefully, and some lucky woman made millions just because she spilled McDonald’s coffee on herself.

By amplifying and distorting stories like these, groups like the Chamber of Commerce and the American Legislative Exchange Council have successfully pushed for bogus tort reform in legislatures, courts of appeal, and the Supreme Court.

This so-called reform functionally transfers wealth from legitimately injured people to multinational corporations and insurance companies by limiting damages, barring class actions, and requiring mandatory pre-suit arbitration. All of these practices either prevent civil cases from being filed in the first place or encourage plaintiffs to settle for far less than their cases are worth.

The ruling class wants to limit its exposure to juries and plaintiffs’ lawyers because the United States, for the most part, does not have a “loser pays” rule. Aside from court costs, an unsuccessful plaintiff does not have to pay the winning side’s legal fees. As a result, the elite argue, plaintiffs are encouraged to file frivolous lawsuits, costing defendants hundreds of thousands of dollars.

But the rule cuts both ways. Losing plaintiffs’ lawyers often do not get paid for their work. Unless they represent well-heeled corporations or extremely wealthy individuals, plaintiffs’ lawyers work on a contingent basis.

That is, the client does not pay unless and until there is a successful result — a settlement or judgment — in which case the lawyer receives costs advanced and a percentage of the recovery, often on a scale of 33.3 percent to 40 percent.

That’s a big chunk. When I was a law student, I complained to my ethics professor that it seemed absurd, say, for a car accident victim to pay 33 percent to the lawyer who just wrote a letter to the insurance company resulting in a settlement equal to the other driver’s policy limits.

The professor responded: see what happens when the injured person tries to handle the claim herself. At best she’ll only get pennies on the dollar from a self-dealing insurance company obligated to its stockholders to pay as little as possible, no matter how valid the claim.

All civil litigation amounts to a sloppy and narrow redistribution of wealth. While some civil suits justly take money from the responsible party to pay medical bills, lost wages, and other damages, it just as often fails to compensate the truly injured or pays out to large corporations, who have no need for the judgment. But how the lawyers get paid often determines how this redistribution plays out.

Plaintiffs’ lawyers share material interests with their clients: if the clients don’t get paid, neither do they. As a result — Chamber of Commerce propaganda aside — stupid cases don’t get brought because the plaintiffs’ lawyers are unlikely to get paid. It also forces many cases into settlement, because both the client and her lawyer bear the risk of a negative outcome.

That’s how it usually goes. And had it gone that way in Bollea v. Gawker — that is, if Peter Thiel had not been involved — the case likely would have settled, and Gawker would be posting today.

Financing a Lawsuit

Bollea certainly isn’t poor. But a breach-of-privacy case against a company like Gawker — which put up vigorous legal and factual defenses — requires a lot of work.

Even before trial, a case like that could require upwards of five hundred hours of work by lawyers who bill $500 or more per hour. A safe estimate would put the cost at least a quarter of a million dollars. Bollea, presumably, did not have the cash on hand to finance his own lawsuit.

Further, the lawsuit might have lost on summary judgment or at trial — and it still may be overturned on appeal. That represents quite a lot of risk for both Bollea and his lawyers.

But as we now know, Bollea had help. Peter Thiel has admitted to paying the lawyers as part of a larger, ongoing project to literally destroy Gawker. Many have already written about the dangerous precedent set by this case. The piqued super-rich, it seems, can now use litigation to destroy journalistic entities they don’t like.

That’s entirely true. But just as importantly, Bollea v. Gawker demonstrates how elites enjoy the civil-justice system’s favor, regardless of any First Amendment implications.

If Bollea didn’t have Peter Thiel, he would have had to hire a lawyer willing to take the case on a contingent fee. Had he done so, his hypothetical contingent-fee lawyer would be operating under entirely different calculations, accounting for the risk of losing, the uncertainty of a lengthy appeal, and the possibility of devoting years to a case that might put her in the hole financially.

However, infused with Thiel’s “fuck you money,” Bollea’s lawyers get paid either way. Accordingly, crushing Gawker — as opposed to reaching a reasonable compromise — became counsel’s first order of business.

Their “scorched earth” attacks in post-judgment litigation against the outlet and particularly against individual defendant A. J. Daulerio, a former Gawker editor, prove this.

Similarly, corporate litigators who represent big companies have relatively limitless resources to fight plaintiffs’ claims and bring their own suits. Monsanto doesn’t care how much it costs to defend itself from the millions of Vietnamese and thousands American soldiers poisoned by Agent Orange, or the people in Anniston, Alabama whose lives and property were destroyed by decades of illegal PCB dumping.

Nor does the expense of suing farmers whose crop may contain patented seeds that blew on their land bother Monsanto. Those legal fees amount to a small cost of doing business and a very handy write-off at tax time.

In the civil-justice system, ordinary people don’t enjoy the same luxury. For every “King of Torts” flying around in a private jet funded by tobacco and asbestos settlement money, millions of individual practitioners and small firms finance their own lawsuits against multinational corporations and insurance companies. They functionally carry much more risk than their own clients when a case fails. But not Bollea’s lawyers.

Peter Thiel’s involvement in the Bollea case, it turns out, is old news, another example of how we live in a pay-to-play system, where, if you have enough money, you are insulated from the risk that ordinary litigants and their counsel bear when they bring a lawsuit. This time, it killed Gawker.

Given Gawker’s consistently fearless coverage of the rich and powerful, and its sympathetic, probing coverage of the working class, we should stop arguing about whether the writers and editors practiced responsible journalism — whatever that is — and instead focus on actually reforming a system that favors wealthy reactionaries willing to foot the bill for vanity lawsuits.