Gawker's Misplaced Attack on Litigation Financing

May 24, 2016
3min read

Look past the sordid details and astounding jury verdict in Gawker’s recent legal battle with Hulk Hogan and a new, potentially more troubling story emerges—or so recent speculation would have you believe. The New York Times details new allegations of outside interests influencing the years-long legal dispute, with charged descriptions of a “netherworld of investors” and backroom benefactors fighting a proxy battle to settle personal vendettas. While the accusations in this instance might be accurate, this characterization of litigation financing distorts the issue and does a grave disservice to the thousands of meritorious plaintiffs that rely on financing to maintain their lives, pay for crucial living expenses, and ultimately secure just results.

Litigation financing is neither new nor nefarious. In fact, Gawker should know this better than most—not only is it funding its Hulk-Hogan-lawsuit via outside investors, but its writers routinely cover the venture capital world, which is no stranger to litigation financing. Small startups like Techforward have used litigation financing to win major battles against behemoths like Best Buy, while famous faces like Taylor Swift have fronted large sums of money for others’ legal troubles. The former case illustrates the equalizing force of litigation financing, while the latter illustrates the altruistic potential of litigation financing. In truth, litigation financing can be an essential option that provides breathing room in the pursuit of justice, whether you’re a multimillion-dollar blog network or single parent involved in a car accident.

Gawker is right to question potential third-party motives and outside influence on investor-financed lawsuits, but it should look in the proverbial mirror. On the matter of outside influence, most litigation financing agreements explicitly prohibit investor influence on case strategy and resolution. Conversely, Gawker’s own funds came in exchange for a minority stake in the company, potentially giving the investor direct influence over case strategy. On top of the outside funding explicitly for its legal defense, Gawker itself is funded by venture capital, adding yet another layer of outside influence to its own side of the case. Additionally, its ability to sell off shares to raise funds for its defense reveals yet another argument in favor of litigation financing—whereas a powerful media company has the flexibility to secure financing and mount a defense, the average personal injury plaintiff looking for financing has few viable options.

Finally, the latest narrative in the Gawker-Hulk-Hogan saga risks overshadowing a central tenet of the dispute: An innocent person was victimized with no option but to seek legal recourse. Perhaps Hogan could have settled the case for a still-sizable amount, saving face for both parties. But therein lies a primary justification for embracing litigation financing: meritorious plaintiffs should not have to settle for less simply because they cannot afford to pursue a lengthy legal battle. Skeptics point to Hogan’s reported financial woes as evidence that he needed financing for his case, as if it’s a black-market transaction reserved for the desperate or, worse, opportunistic. In reality, litigation financing in the right hands empowers plaintiffs who would otherwise have no access to just results in the face of a well-heeled defendant. Whether or not you can sympathize with Hulk Hogan or believe he was a pawn in a larger beef, his case proved meritorious and a jury decided the award, not a netherworld benefactor. And whether or not you agree with litigation financing, everyone deserves equal access to justice regardless of financial standing—wholesale rejection based on misplaced preconceptions is akin to using a missile to kill a mouse, with meritorious plaintiffs as collateral damage.

Image Credit: Mike Kalasnik

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