Third-Party Litigation Funding:

Whatever Happened to Champerty and Maintenance?

Jackson Beal*
May 2, 2017

In March of 2016, Terry Bollea, the former professional wrestler known as Hulk Hogan,

won a landmark civil suit against Gawker Media for a posting—by its flagship website,

Gawker.com—of a sex video featuring him. He sued Gawker Media for invasion of privacy,

infringement of personality rights, and intentional infliction of emotional distress. The jury

awarded Bollea $140 million in damages, including compensatory damages of $55 million for

economic harm and $60 million for emotional distress. The award also included $25 million in

punitive damages. 1

The judgment was so large that it led to the collapse of Gawker Media. The company

filed for Chapter 11 bankruptcy protection and was sold in August of 2016 to Univision
23
Communications for $135 million. Gawker.com ceased operations permanently.

Observers of the case were surprised to learn that Silicon Valley billionaire Peter Thiel

funded the case against for an estimated $10 million, telling the New York Times he did so as a

“‘specific deterrence’” against publication of articles that Thiel regarded as “‘painful and

paralyzing’” to people whom Gawker.com “‘targeted.’” 4

The case raised many issues that are of continuing concern in the media business and

among media lawyers. Concern has focused on: the threat of litigation funded by third parties

1
Nick Madigan, Jury Tacks On $25 Million to Gawker’s Bill in Hulk Hogan Case, The New York Times, March 21,
2016.
2
Nick Madigan and Ravi Somaiya, Hulk Hogan Awarded $115 Million in Privacy Suit Against Gawker, The New
York Times, March 18, 2016.
3
Sydney Ember, Gawker is Said to be Sold to Univision in a $135 Million Bid, The New York Times, Aug. 16,
2016.
4
Andrew Ross Sorkin, Peter Thiel, Tech Billionaire, Reveals Secret War With Gawker, The New York Times, May
25, 2016.
against the media, particularly by parties with deep pockets; the appeal third-party support for

litigation can have for lawyers who would like to tackle the media; the chilling effect that the

threat of third-party funded actions may have on the media, and the status of laws and ethics

rules that were designed to stop or at least limit third-party funding of litigation. While various

rules exist to govern third-party litigation funding, their scope and effectives are a matter of

debate. Many scholars and disciplinary authorities have paid close attention to the rules to see

how impactful they are in practice and whether they may wither in the face of the booming

business that litigation finance has become. Finally, while the threat of litigation against media

organizations seems to be an increasing threat, it is important to note they also can seek third

party funders to help with their defense.

The outcome of the Thiel-funded case against Gawker rocked the media business, because

it showed how a well-financed grievance against a media company actually could cause it to shut

it down. To be sure, Gawker.com was not necessarily held in high regard in the media industry.

For example, one critic of Gawker.com blasted it as being driven by “depravity and avarice.” 5

While media companies generally might not have been thrilled with its aggressive, attention-

grabbing brand of journalism, Gawker was undeterred. One of its stated goals was to “afflict the

comfortable.” In an editorial for the New York Times headlined, “Gawker’s Gone. Long Live

Gawker,” the author muses on the good and bad that Gawker brought to the mainstream,

particularly in how it changed what journalism could do for the Internet. The author wrote, “A

lot of the Internet is wonderful. A lot of the Internet is terrible. For both, blame Gawker.” 6 In the

New Yorker, Jeffrey Toobin wrote about the potential threat to the First Amendment with the

5
Ryan Holiday, Goodbye and Good Riddance: Sociopathy of Gawker and Media Finally Exposed, Observer, March
16, 2016.
6
Farhad Manjoo, Gawker’s Gone. Long Live Gawker., The New York Times, Aug. 24, 2016.
outcome of this case. He wrote, “Hulk Hogan conceded that Gawker’s story about him was true,

yet he still won a vast judgment and, not incidentally, drove the website out of business. The

prospect of liability, perhaps existential in nature, for true stories presents a chilling risk for those

who rely on the First Amendment.” 7

Charles Harder was Hogan’s attorney in the case and immediately after the verdict was

retained by Melania Trump to represent her in a defamation case against the UK’s Daily Mail for

suggesting she worked as an escort in the 1990s. Although the publication issued a retraction

and apology, that wasn’t enough for Harder who said, ““The Daily Mail inflicted massive

damages upon Mrs. Trump’s reputation, and their retraction was half-hearted.” 8 Since then, the

case has been settled, with the Daily Mail agreeing “to pay damages and issue an

apology.” 9

Harder has developed a fearsome reputation in the media industry, which is why, in a

profile on him published by GQ, Jason Zengerle wrote, “In 2016, Harder established himself as

perhaps the greatest threat in the United States to journalists, the First Amendment, and the very

notion of a free press.” 10

The outcome of the Gawker case was chilling enough for media organizations, but the

revelation that Peter Thiel secretly funded Bollea’s lawsuit sent shockwaves through them. 11

Harder told Zengerle he was not aware Thiel was the person funding the case when it was in

7
Jeffrey Toobin, Gawker’s Demise and the Trump-Era Threat to the First Amendment, The New Yorker, Dec. 19,
2016.
8
Nadi Khomami, Hollywood Lawyer who Fought Gawker Goes to Bat for Melania Trump, The Guardian, Oct. 5,
2016.
9
Laurel Wamsley, Melania Trump And The 'Daily Mail' Settle Libel Lawsuits, National Public Radio, April 12,
2017.
10
Jason Zengerle, Charles Harder, the Lawyer who Killed Gawker, Isn’t Done Yet, GQ, Nov. 17, 2016.
11
Ryan Mac, This Silicon Valley Billionaire Has Been Secretly Funding Hulk Hogan’s Lawsuits Against Gawker,
Forbes, May 24, 2016.
litigation. “‘We researched to make sure it was a hundred percent ethical and a hundred percent

legal, and it was,’ Harder assures me (Zengerle). It wasn't until after the trial, when the Forbes

reporter 12 who broke the story of Thiel's role contacted [Harder] for comment, that he learned the

altruist's identity.” 13

Journalists and media lawyers alike think the successful, Thiel-funded case against

Gawker Media could set a precedent and foster more litigation against the media, ultimately

threatening to undermine the holding of New York Times Co. v. Sullivan. 14 In a Pacific Standard

article discussing the case, journalist Ted Scheinman interviewed Peter Scheer, the executive

director of the First Amendment Coalition, on Thiel’s role. Scheer said: “‘I’m deeply troubled,

as I think a lot of people are, by the fact that an individual with very deep pockets, Peter Thiel in

this case, is able to silence a publication that he disagrees with, or that he just doesn’t like.’” 15

Thiel isn’t the only one with the deep pockets who has the same idea as he. Billionaire

entrepreneur Frank VanderSloot lost a defamation suit against Mother Jones in 2015 and then

launched the “Guardian of True Liberty Fund” to “help individuals who have been unfairly

attacked by the liberal media mount a legal defense.” 1617 The fund’s website says that

VanderSloot personally pledged the first $1 million to “provide financial support to conservative

individuals who find themselves smeared by the left-wing agenda.” 18

Why Should You Care?

12
Ryan Mac, This Silicon Valley Billionaire Has Been Secretly Funding Hulk Hogan's Lawsuits Against Gawker,
Forbes, May 24, 2016.
13
Zengerle, supra, note 10.
14
Id.
15
Ted Scheinman, With the Gawker Sale, What’s Next for the First Amendment?, Pacific Standard, Aug. 19.
16
Monika Bauerlein and Clara Jeffery, We Were Sued by a Billionaire Political Donor. We Won. Here’s What
Happened., Mother Jones, Oct. 8, 2015.
17
VanderSloot Starts Fund to Defend Conservatives Against Defamation, Idaho State Journal, Oct. 8, 2015.
18
About, Guardian of True Liberty (http://melawebsites.com/gftlf/about/).
 The outcome of the Gawker case has caused many to wonder whether it is the start of a

trend. “‘This [case] could really change the landscape because everyone who has gripes about

what the media has done is going to start thinking about dollars and cents, and running to their

lawyers,’” said Thomas Julin, a lawyer specializing in the First Amendment. 19 “‘Litigation

financing is really dangerous,’” according to Bryan Quigley, from the Institute for Legal Reform.

“‘There’s no doubt it’s going to create more litigation in general.’” 20 In the U.S., litigation

finance is a booming industry. The market is currently valued at over $200 billion and only

going higher. 21 The question is, to the extent that the trend toward litigation finance threatens

freedom of the press, what can stop it?

Origins of Limiting Doctrines

In a New York Times Magazine article headlined, “Should You Be Allowed to Invest in

a Lawsuit,” Mattathias Schwartz traced the origins of the first bars to third-party funding all the

way back to ancient Greece. As he explained:

Despite the hypercapitalist spirit of its rise, litigation finance

actually has its roots in antiquity. According to Max Radin, a historian of

ancient city-states, members of Athenian political clubs would back each

other in lawsuits against their rivals. Apollodorus, a wealthy banker’s son,

bought shares of lawsuits and hired professional orators — some of the

earliest lawyers in Western history — to write his court speeches. The

Romans tolerated the practice in some cases until the sixth century, when it

19
Davey Alba and Jennifer Chaussee, Got a Beef With the Media? Pay Someone Else to Sue Them, Wired
20
Id.
21
Id.
 was banned by Emperor Anastasius. The Roman taboo on litigation finance,

Radin writes, sprang from the idea that ‘‘a controversy properly concerned

only the persons actually involved in the original transaction,’’ not self-

interested meddlers. In medieval England, litigants could hire ‘‘champions’’

to represent them in ‘‘trial by battle.’’ By the late 13th century, these

strongmen were being compared to prostitutes, and their prevalence

hastened the movement of dispute resolution to the courtroom. During the

Middle Ages, this concept of ‘‘champerty’’ — assisting another person’s

lawsuit in exchange for a share of the proceeds — emerged as part of the

larger ecclesiastical taboo against usury. Though the word was associated

with feudal land grabs, Radin notes that in practice, champerty was used by

rich lawyers ‘‘on behalf of propertied defendants.’’ In 1787, Jeremy

Bentham, the political philosopher, mocked prohibitions on champerty as a

holdover from feudal days, where courts were beholden to ‘‘the sword of a

baron, stalking into court with a rabble of retainers at his heels. 22

These concepts were imported to the United States from the common law of England,

and, while they have been modified, they have not been abandoned altogether. 23 The

Restatement of Contracts defines maintenance to be the maintaining, supporting or promoting of

litigation of another person, while champerty is the division of the proceeds of litigation between

the owner of the litigated claim and a party supporting or enforcing the litigation. 24 In other

words, “When a person advanced money to support a suit in which he had no interest, he was

22
Mattathias Scwartz, Should You Be Alllowed to Invest in a Lawsuit?, The New York Times, Oct. 22, 2015.
23
S.J. Brooks, Champerty and Maintenance in the United States, Virginia Law Review Vol. 3, 421-431 (1916).
24
Arthur L. Kraut, Contingent Fee: Champerty or Champion, Cleveland State Law Review, 15-29 (1972).
guilty of maintenance—the difference being that in champerty he received an interest in the thing

in suit while in maintenance he did not.” 25

In most jurisdictions outside of the U.S., it was thought that a lawyer’s contingency fee

was champertous:

The claims asserted by opponents of the contingent fee are that the

contingency of the fee adds a high degree of speculation to the practice of

law. This speculation gives rise to such practices, on the part of attorneys,

they say, as soliciting and “quickie” settlements, the purpose of which is to

achieve a higher rate of return through increased quantity of clients and

suits. As a consequence, it is asserted, the quality of professional services

suffer because the attorney became a partner in the lawsuit rather than an

impartial advocate of his client’s cause. The claim is made that the attorney,

by reason of the contingent fee contract, is changed from a knight in shining

armor, protecting his client’s case into an ambulance chaser and shyster,

protecting only his fee. 26

One does not need to be a lawyer to realize that in this modern age, the contingency fee is

one of the most firmly established ways for litigation to be financed in the majority of U.S.

jurisdictions. But this was not always the case, and when the doctrines were first imported from

England, there was some confusion as to how they were to be applied:

Champerty is merely a word used to describe certain types of

contractual transactions which are deemed contrary to public policy and

25
Brooks, supra, note 22.
26
Kraut, supra, note 23.
 which also come within the prohibitions of the larger field labeled

maintenance. At one time or another every court in this country has felt it

necessary to express its own ideas as to what is the real policy behind the

doctrine of maintenance and champerty and to give what the court feels is

the definition thereof… The mischief which the old law aimed to correct

and which still should be prevented by the modern law of champerty and

maintenance is aptly described as ‘the traffic of merchandizing in quarrels,

of huckstering in litigation discord.”. 27

This point is well taken in the sense that there are cases where the court had no statutes

under which to void a contingency fee, so instead it relied on public policy. Key v. Vattier is an

1823 Ohio Supreme Court case where a lawyer maintained the lawsuit and, instead of taking a

percentage of the proceeds as a contingency fee, his client agreed to give him 50% of the land

that was in dispute in the litigation. This was more of a per se contingency fee and there were no

common laws that would have prohibited this particular arrangement. The court instead relied

on medieval English definitions of champertous agreements to prohibit the contract,

“Champertous contracts were used by the lords in England of old to harass the smaller land

owners. The court found that the reasons behind the public policy prohibiting such contracts was

as valid today as it was in medieval times. The judge concluded by ruling that contracts which

would have constituted champerty at common law were still against public policy.” 28

As the 19th century passed and yielded to the early 20th, courts became increasingly

hesitant to deem contingency fees between clients and lawyers as champertous. “In the case of

27
Charles R. Moon, Jr., Champerty and Maintenance: Validity of Contingent Fee: Contracts by Layment to
Proescute and Collect Claims Against the Government, Michigan Law Review, Vol 36, 259-267 (1937).
28
Kraut, supra, note 23.
Dahmn v. Sears, the court held that while an attorney might contract for a contingent fee, he

could not purchase a claim for the consideration that he would prosecute it in his own name for a

part of the amount recovered.” 29 Judge Thayer, who presided over the case, wrote a lengthy

opinion on the matter. The main thesis could be best said to have been that the lawyer, “has no

right to become attorney and client at the same time.” 30 By this point, it took more than just a

contingency fee for a court to find a contract champertous. As previously said, this is not an

abandonment of champerty and maintenance, but only the first step in their evolution. NAACP v.

Button 31 is the next case where the doctrines were examined and set a precedent for barring them

in many U.S. jurisdictions.

In Dahmn, Judge Thayer’s problem was that the lawyer, “has no right to become attorney

and client at the same time.” NAACP v. Button was a 1963 landmark U.S. Supreme Court case

where the same sentence could be used except that the term “third-party funder” would replace

“attorney”. This case set a precedent making it easy for someone with no direct interest in a

lawsuit, like Thiel, to fund it as a third party. NAACP v. Burton came out of Virginia during the

Civil Rights Movement. Virginia had adopted a 13-statute proposal titled the Stanley Plan,

designed as a massive resistance to the outcome of Brown v. Board of Education. 32 The statutes

included a provision that expanded Virginia’s definition of champerty to include third-party

funders, effectively making it so that organizations like the NAACP could not fund civil rights

cases. Robert Button was the Attorney General of Virginia at the time and the NAACP sued

him, claiming this statute was a violation of their First Amendment rights. The Court agreed,

29
Brooks, supra, note 22.
30
Dahmn v. Sears, 13 Or. 47, 63; 11 P. 891, 898 (1886).
31
371 U.S. 415 (1963).
32
347 U.S. 483 (1954).
holding “Virginia’s champerty and maintenance laws violated the First Amendment, because

litigation–and the sponsorship of it–is a vehicle for expressing viewpoints.” 33

Eugene Kontorovich, a constitutional law professor at Northwestern University School of

Law, and a frequent contributor to the Volokh Conspiracy, the Washington Post’s legal blog,

expands on the holding by saying, “Anyone who donates to the ACLU or a Legal Aid fund is

basically underwriting third-party litigation.” 34 idea has only expanded for public interest cases.

Two weeks into the Trump administration, CrowdJustice, a UK crowdfunding organization,

launched in the U.S. and used crowdfunding to bring a suit on behalf of two Yemeni brothers

who were stopped from entering the U.S. because of the travel ban. 35 Although funding public

interest cases has been allowed since NAACP v. Button, the ways in which parties can raise funds

has modernized.

As the Washington Post has reported, “Most recently, private profit-motivated litigation

finance has emerged as an industry in its own right, unburdened by any concern over the old

common law rules.” 36 The private profit-motivated litigation finance Mr. Kontorovich

mentioned is the focus of the third and most recent battle in U.S. jurisdictions where the

doctrines were largely put away. At first, they meddled with contingency fees between lawyers

and their clients, then they were void because nonprofits had the right to express their views and

they would have violated the First Amendment. Now, what’s the justification of a third-party

funder who is simply seeking to profit from a case?

33
Eugene Kontorovich, Peter Thiel’s Funding of Hulk Hogan-Gawker Litigation Should Not Raise Concerns, The
Washington Post, May 26, 2016.
34
Id.
35
Hanna Kozlowska, Crowdfunding for Public-Interest Lawsuits Has Come to the US, Just in Time for Trump’s
Presidency¸ Feb. 5, 2017.
36
Kontorovich, supra, note 32.
 As one writer has observed, “Third-party funding began in Australia, made its way to the

United Kingdom, and is now becoming more prevalent in the United States.” 37 Champerty,

meanwhile, has become almost quaint as litigation finance has surged. As has been observed:

With the rise of capitalism—and the explosion of litigation in the

1950s—the prohibitions around these old common laws fell out of fashion.

‘This sector is about purely rational actors trying to make money investing

in litigation because they believe the introduction of additional capital can

add value,’ says Anthony Sebok, a professor at Cardoza Law and a

consultant for Burford Capital, a British litigation investment firm. 38

According to one analysis, “Today, state approaches to champerty have divided into

three camps: 1) some states have reinforced historic applications of champerty; 2) other states

have relaxed prohibitions on champerty; and 3) still other states have abolished the doctrine of

champerty. In all, 18 states explicitly permit champerty in some form.” 39

When the economy was collapsing because of the housing bubble in 2008, many

investors looked around for what they thought would be sure investments. Juridica Investments

was founded right before the collapse and is the first big US investment company that

specialized in litigation funding. “By around 2008…general anxiety among investors made a

relatively sure thing like litigation financing attractive. This is partially because big investors can

tip scales in their favor simply by pouring money into a case.” 40

37
Jacqueline Sheridan, Champerty and Maintenance in the Modern Era, Jan. 22, 2016, DRI, The Voice of the
Defense Bar, Jan. 22, 2016.
38
Alba and Chaussee, supra, note 18.
39
The Rise Of 3rd-Party Litigation Funding, Law 360, January 21, 2011)
40
Alba and Chaussee, supra, note 18.
 In this context, questions arose about whether historic rules could hinder litigation

financing.

In 2009, the New York Court of Appeals gave champerty a narrow

reading in a distressed debt market context. Specifically, the Second Circuit

asked the New York Court of Appeals whether New York champerty laws

prohibit buyers or secondary holders of distressed debt from bringing

claims related to the debt in question. The Court of Appeals answered that

the champerty statute does not apply to collection of a legitimate claim, but

rather bars purchased claims that would not be prosecuted if not ‘stirred up.’

The law’s purpose, declared the court, is “to prevent attorneys and solicitors

from purchasing debts, or other things in action, for the purpose of

obtaining costs from a prosecution thereof, and was never intended to

prevent the purchase for the honest purpose of protecting some other

important right of the assignee.” 41

The doctrines of champerty and maintenance have slowly, but significantly, been

narrowed since they were imported from England, and it could be argued that, in Bollea, Thiel’s

funding of the claim was not frivolous or stirring up litigation. Many law professors, such as

Kontorovich, agree:

The disappearance of champerty and maintenance (and the related

barratry) doctrines has not been entirely a good thing in my view, but in

practice no one is calling for their revival. By current standards, Thiel’s

41
Sheridan, supra, note 36.
 funding should raise no eyebrows — unless one also wants to revisit public

interest litigation, class actions and contingent fees.

Critics of Thiel’s role in the Gawker case argue that it is particularly

inappropriate because they think he is motivated by ‘revenge’ over the

gossip site’s earlier publication of stories about his private life. But if the

lawsuit is not frivolous, it is hard to see how the motivations of funders are

relevant (or discernible). One would not say a civil rights organization

could not accept donations from philanthropists angered by a personal

experience with discrimination. All Thiel has done is cut out the

middleman. 42

Professor Kontorovich is not the only one who thinks there is nothing wrong with what

Thiel did from a legal standpoint. “‘if you really do have concerns about the merits of this case,

finding out who bankrolled it doesn’t really help at all,’ said Mary Anne Franks, a professor at

the University of Miami School of Law. Absent any indication that there is something unlawful

about how the funding took place, she said, ‘you would still need to show that there’s something

substantively wrong with the ruling.’” 43

Even if third-party funding for profit wasn’t allowed, according to Thiel, all he needed

was the NAACP v. Button ruling in order to legally fund the case. In an interview with the New

York Times, Thiel said he considered his funding of the cases against Gawker to be “‘one of my

greater philanthropic things that I’ve done.’” 44

42
Kontorovich, supra, note 32.
43
Sorkin, supra, note 4.
44
Id.
 Professor Kontorovich sums up the ethics and justification for the funding as an issue of

principles and policy, saying:

Gawker is institutionally committed to revealing the private lives of public people. The

question of how far the privacy rights of celebrities go is a legitimate one, and Gawker’s

anything-goes position is not without merit. But it is a legal and policy question. 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. Litigation funding

is not reserved to Mr. Spock. 45

Even if this particular case was done ethically and legally, there is still a lot of ambiguity

on the ethics of third-party litigation funding generally. Ethical questions that may arise concern

the duty counsel owes to third-party financers, the confidentiality of a third-party funder, what

happens when the client and the funder disagree about litigation strategy or a settlement, and if

the funding is seen as a loan or an investment. What makes these questions hard to answer is that

there is no clear cut rules for modern third-party litigation funding. There are different statutes,

case law precedents, and ethical opinions that suggest different approach, but currently the

industry is seen as a “wild west” in that none of these approaches is harmonized. 46

The most encompassing ethical question concerns the duty a lawyer has to his or her

client versus to the funder. “According to attorney ethical rules in most states within the United

States, the funder must not exercise any control over the legal representation or the attorney.” 47

Even so, there are many times when funders will object to a settlement offer or to a litigation

45
Kontorovich, supra, note 32.
46
Victoria Shannon, Harmonizing Third-Party Litigation Funding, Cardozo Law Review Vol. 36, 862-912 (2016).
47
Id. at 861.
strategy if they could get more money with an alternative. This gets complicated when a

litigation funder “has invested in a large group of that law firm’s cases or perhaps the firm’s

entire litigation practice.” 48

A concern regarding ethically negotiating funding arrangements is the

role of the lawyer in the case. Often the lawyer introduces the client to the

funder and then proceeds to negotiate the funding arrangement. However,

if the lawyer and the funder have an arrangement whereby they often refer

business to each other, then the interests of the two of them may trump the

interest of the underlying client as they are negotiating the funding

arrangement. A further difficulty is that both the lawyer and the funder are

involved in the case for profit, so their interests may not completely align

with the client’s interests. As a possible solution to this issue, the American

Bar Association recommends that attorneys notify their clients that they

have the option of retaining separate legal counsel for negotiating the

funding arrangement. 49

In many cases, while there are clear agreements between the attorney and client, there

might also be an agreement between the client and the funder, which would conflict with the

attorney’s ethical obligations. For example, “the funding agreement may state that the funder

must approve any settlement agreement, but the attorney’s primary ethical responsibility is to

negotiate the best deal for the client, even if it is not the best deal for the funder. The best deal

for the client may include non-monetary terms that do not carry any financial benefit for the

48
Lisa Rickard and Mark Behrens, Transparency Needed as Third-Party Litigation Funding Enters the Mainstream,
IADC Committee Newsletter, Sep. 2016.
49
Id.
funder, so the attorney may feel pressure to focus on the monetary aspects of the settlement

rather than taking a holistic approach.” 50

As one scholar observed: “The rules of professional ethics govern attorneys in the

jurisdiction(s) in which they are licensed, but even with those ethical rules, lawyers cannot really

influence the behavior of funders very much except by withdrawing from the case or not

referring clients to the funder in the future.” 51 Until there are more harmonized rules on the duty

a lawyer has to his client, there will be conflicts in the agreements. Funders, along with most

courts, see their contribution as an investment rather than a loan, so they expect to receive profit

from the case on top of their initial return. The point of all the ethical quagmires that are entailed

in third-party litigation funding is that right now, rules haven’t been developed to stop investors

from expanding this industry. And while journalists may not know the gritty details of why

third- party funding of litigation is allowed, their knowledge that it is allowed, as in Bollea, has

made them uneasy at the least.

Although publications across the country were concerned about the outcome of the case,

Thiel claims he was not trying to attack the First Amendment. He will cite the fact that he

constantly defends free speech and that he donates to the Committee to Protect Journalists.52

Further, he has been quoted as saying, “I refuse to believe that journalism means massive privacy

violations. I think much more highly of journalists than that. It’s precisely because I respect

journalists that I do not believe they are endangered by fighting back against Gawker.” 53

50
Shannon, supra note 45, at 906.
51
Id. at 907.
52
According to the Committee to Protect Journalists, it is a “nonprofit organization that promotes press freedom
worldwide. We defend the right of journalists to report the news without fear of reprisal.”
53
Sorkin, supra note 4.
 Although Thiel’s funding of the case may be unique, concern lingers about whether

others may follow his path.

“’This is potentially a powerful weapon to get even with the press,” says Walter Olson, a

senior fellow of the Cato Institute and a writer for the website Overlawyered. ‘If you want a

nightmare scenario, it could happen not just with billionaires, but with some clearinghouse

organization who can’t stand the press, or some sector of the press.’” 54

How Can the Media Cope?

If media feel threatened by third-party funded litigation, they may need to prepare to

cover cost of defense by seeking their own outside funding sources. To be sure, media already

have access to liability insurance, but it may come at a daunting price or with significantly

limiting terms and conditions. Thus, in addition to insurance, media defendants may have need

for their own third-party funding when plaintiffs bring claims with third-party support. In the

adversarial legal system, there is no reason why defendants cannot use the same tools as

plaintiffs. Indicates are that third-party legal defense support for media is developing. For

example, main activities of the Knight First Amendment Institute at Columbia University will

include litigation. The Knight Foundation says the institute “will watch for court cases that offer

an opportunity to define First Amendment law in the digital age, with a goal of achieving

significant victories, and priority given to cases with digital components.” 55

At the state level, the Washington Coalition for Open Government illustrates how an

organization may, at least indirectly, provide legal support to media. The Washington Coalition

54
Alba and Chaussee, supra, note 18.
55
Knight Foundation, Columbia University Launch First Amendment Institute, $60 Million Project to Promote Free
Expression in the Digital Age, Knight Foundation, May 17, 2016 (http://news.columbia.edu/content/knight-
foundation-columbia-university-launch-first-amendment-institute-60-million-project).
is “a non-partisan, non-profit organization dedicated to promoting the people’s right to know in

matters of public interest and the public’s business.” 56 The Washington Coalition says, “From

time to time, WCOG may need to institute litigation to further its mission.” 57 It has seven

criteria for deciding whether to undertake litigation.

For most cases, the media’s liability insurance should suffice as a means of covering the

cost of defense. Even so, insurance coverage has it limits, and media may need a back-up plan if

they face a plaintiff who is supported by a person with deep pockets who doesn’t like something

they published and is driven by anti-media bias. Jason Zengerle, who wrote the GQ profile of

plaintiff’s lawyer Charles Harder said, “I don’t know how journalists cope with the threat of

third-party funding and endless litigation other than by pulling their punches—by trying to avoid

(either consciously or subconsciously) reporting and writing things that might anger people with

a lot of money and power, who might use both to finance revenge suits.” 58

Zengerle’s notion of “pulling punches” to avoid litigation is not unique to him. Noah

Feldman, a Bloomberg View columnist and a professor of constitutional and international law at

Harvard University, wrote about an incident in which a report related to Trump’s presidency was

held back because of legal concerns. He said:

As a lawyer, I’m embarrassed that the American Bar Association

commissioned a report about Donald Trump’s use of libel threats, then

refused to publish it out of fear that Trump, the Republican presidential

nominee, would sue the organization for libel. The episode, however,

56
Criteria for WCOG Participation in Litigation, Washington State Coalition for Open Government
(http://washingtoncog.org/legal/criteria-for-litigation/).
57
Id.
58
Interview with Jason Zengerle by e-mail conducted by the author, December 18, 2016.
 dramatizes how effective libel threats are in chilling speech -- and how they

work in real life, driven by the professional caution that lawyers cultivate on

behalf of their clients. 59

The point Professor Feldman is making isn’t that media companies are worried

that they are actually being libelous, it’s that publishing a sensitive report is not worth the

risk of being sued. He said:

Trump couldn’t possibly win a libel suit against the ABA for calling

him a libel bully. He’s a public figure, and the charge is either a matter of

interpretation or else objectively true. All of these would protect the ABA -

- and the internal e-mails acknowledge that a suit by Trump would have no

legal merit. Yet a libel suit by Trump would still make bad headlines for

the ABA, put Trump on the offensive, and cost time and money to defend.

The odds of Trump winning would be tiny, but the potential verdict could

be large… And that’s why libel bullying is a free-speech problem: It

systematically chills free speech by changing publishers’ incentives. The

First Amendment regulates state action, not private action. But it’s the

threat of government action -- the successful libel suit -- that scares the

publishers into silence. The libel bully co-opts the system into his efforts to

silence speech he doesn’t like. And lawyers, looking out for the interests of

their clients, do his dirty work for him. 60

59
Noah Feldman, Lawyers’ Fear of Trump Proves Their Point About Bullies, BloombergView, Oct. 2016.
60
Id.
 Whether Bollea will be a significant precedent for third-party litigation funding is still

uncertain. There are various ethical issues that come up with a complicated case like this, and

lawyers and legal scholars alike are unsure about how to evaluate the rapidly evolving industry

of third-party litigation funding. 61 Uncertainty about the industry is inevitable when no clear

ethical rules have been set for the relationships among a lawyer, the client, and the funder. So

journalists must decide how to cope with the risk of being a defendant in a case funded by a third

party. In an age of so-called “alternative facts” and fake news, defending a published news

report as factual and true may be more difficult than ever. Funders may be motivated to support

litigation against the media if the odds of winning a case increase. In response to the risks,

journalists and respected organizations like the ABA may pull their punches. But for those who

dare to exercise their First Amendment rights fully, it is important that they have access to third-

party litigation defense funding if they need it. That may be the lesson to be drawn from Bollea.

* Mr. Beal, a first-year student at the University of Kansas School of Law, wrote this
paper in his capacity as a research assistant in the School’s Media, Law and Technology
program. The paper is a work in progress, subject to review and further development after the
May 5th Media and the Law Seminar in Kansas City (https://law.ku.edu/media-law-seminar).

61
Barry Meier, Revenge and the Future of Media Finances, New York Times, May 26, 2016.