Peter Thiel is not a feudal lord in an sovereign maritime colony — at least not yet. But his strategy of quietly financing other people's lawsuits to weaken an enemy was once a well-known tactic of aristocrats and land barons, and led to longstanding legal principles that outlawed it.
Prohibitions against what's called champerty, barratry, and maintenance — all relating to people involving themselves in legal disputes they aren't directly connected to — have precedents that date back to ancient Rome. For hundreds of years, there were rules against third parties financing or speculating in civil claims in American courts.
"In feudal days, there was the risk that the powerful could abuse the litigation process to steal land from those less powerful by manufacturing lawsuits in which they otherwise had no interest," the commercial litigation finance firm Burford Capital said in a letter to two Republican senators looking into their industry.
The descriptions of what motivated the original rules against funding other people's lawsuits may sound strikingly familiar to those following news of Thiel's extended campaign against Gawker.
A Colorado judge explained it in 1900: wealthy nobles would "buy up claims, and, by means of their exalted and influential positions, overawe the courts, secure unjust and unmerited judgments, and oppress those against whom their anger might be directed."
Or consider how the English philosopher Jeremy Bentham, the intellectual grandfather of allowing outsiders to fund litigation, described the origins of champerty laws in a 1788 tract: "A man would buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into court with a rabble of retainers at his heels, might strike terror into the eyes of a judge."
Such rules restricting outside involvement in lawsuits faded away in the 20th century, thanks to Supreme Court decisions, the rise of class-action lawsuits, and states changing their own laws.
They didn't always change them for the noblest of reasons. In response to the Brown v. Board of Education decision, where the NAACP famously directed and represented the plaintiffs throughout the entire legal process "seven southern states suddenly discovered a need to reinvigorate" laws against outsiders supporting lawsuits, the Yale Law Journal wrote in 1963.
In 1963 the Supreme Court overturned Virginia laws, enacted the year after Brown was decided, that restricted the role of outside parties in lawsuits. The court ruled they violated the First and Fourteenth amendments. But such laws had mostly fallen by the wayside by then, according to Eugene Kontorovich, a Northwestern University law professor.
“Thiel’s conduct fits into the ‘public interest’ or ‘ideological’ litigation paradigm,” Kontorovich wrote in the Washington Post. “Thiel was in essence financing what he understood as public interest litigation on an issue of public concern. That he also may or may not have had feelings about it does not change that.”
Such public interest litigation has become a central pillar of efforts by groups like the American Civil Liberties Union, which identify areas of concern and then search for the ideal lawsuit that will help them test or overturn laws.
In the case of Gawker, Thiel's bottomless pockets have helped create a lawsuit that was impossible to resolve out of court — Hogan reportedly turned down a $10 million settlement offer — and brutally expensive to fight. "If anyone thinks there’s a problem with Peter Thiel, the first thing to blame is the American civil justice system, where a relatively straightforward lawsuit about a sex tape can cost ten million dollars" to fight, Kontorovich told BuzzFeed News.
Expensive litigation is a cost of doing business for big companies, and paying for it has become an industry of its own, with litigation financing companies specialized in putting up the money to help customers make it through a lawsuit.
Those businesses operate in a fashion similar to lenders or investors, with eyes on the bottom line. But Peter Thiel's crusade "raises an interesting possibility that you might have litigation financing purely on spite," said Jeremy Kidd, a law professor at Mercer University said.
"If you have someone who’s really wealthy, someone like Donald Trump," Kidd said, "it wouldn’t really matter whether he won, he could tie individual media outlets up in knots for years... if all you’re worried about is spite, it might be worth spending significant amounts of money if they wrote a bad piece about you."
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at firstname.lastname@example.org.
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