The situation is disconcerting. Entrepreneur, technology personality, Internet dad, and Prince fan Anil Dash compared Thiel’s underwriting of the Hogan lawsuit to James Bond villainy—a potentially apt characterization, given Thiel’s interest in a man-made offshore libertarian paradise. And also because the motivation for his intervention appears unhinged rather than savvy. Thiel has a longstanding feud with Gawker, whose eponymous gossip site outed him as a gay man, and whose former Silicon Valley rag Valleywag he once compared to a terrorist organization.
Litigation finance—funding another party’s civil lawsuit—isn’t illegal, even if, in this case, it does seem slimy. But normally, such arrangements are made strictly for business. As Mattathias Schwartz reported for The New York Times last year, it’s become increasingly common for investors to “buy shares” in litigation. For the litigant, selling a part of a potentially lucrative lawsuit can help offset the high upfront costs of the litigation and reduce some of its associated risk. And for the investor, the litigation becomes akin to any other security—as Schwartz puts it, “lawsuits are making a transition from a private arrangement to a fully monetized asset class.”
Investors also fund lawsuits for strategic reasons. A litigation can set precedent in an industry, create or alter public perception of an issue, and financially rout a successfully litigated company. Such turns of fortune give litigation investment a secondary benefit for hedge funds and other aggregators of securities, which might have other investments that would benefit from a desirable outcome in a particular case.
But Thiel didn’t bankroll Hogan’s case against Gawker for financial gain. Hogan’s legal team dropped one of its claims, which would have allowed Gawker’s insurance to cover its settlement and legal costs. And absent a settlement, the case could take years of appeals to resolve. A litigation investor would be unlikely to facilitate a maneuver that would reduce or delay the payment of damages. Meanwhile, there’s limited strategic reason for a tech billionaire like Thiel to target Gawker Media—Valleywag closed in 2015, and Gawker is little more than a nuisance for Thiel. All the more reason to take Thiel’s motives as Bond-villain rationales rather than logical ones: a vendetta rather than a venture.
None of this would be terribly remarkable in the world of banks, billionaires, and other bastions of egomania. Certainly hedge fund managers are just as likely, if not more so, to unleash tempers and realize grudges. But once those tempers and grudges move out to Silicon Valley, a surprising revelation surfaces: If anything, someone like Thiel funding a lawsuit just to “disrupt” a news site he hates feels more like the kind of abuse associated with Internet trolling than it does like hedge fund opportunism.