Hulk Hogan, litigation funding, and Ireland

02nd Jun 2016

By: Scévole de Cazotte.

In March, professional wrestler and television personality Hulk Hogan won an invasion of privacy lawsuit against an internet gossip website owned by Gawker Media. Faced with a US$140 million judgment, Gawker’s continued viability is threatened if it does not prevail on appeal.

But Hogan was not the only one who benefitted in the case. Silicon Valley billionaire and co-founder of PayPal, Peter Thiel, was also a winner. Thiel had secretly funded Hogan’s lawsuit, putting up US$10 million as apparent revenge for gossip about him published on a Gawker blog.

Thanks to extensive media coverage of the Hogan/Thiel case, many are now learning about third party litigation funding (TPLF), where strangers who are not parties in a dispute invest in a lawsuit. Thiel’s situation may be different from a typical TPLF arrangement, in that it is not known whether he stood to make any direct financial gain from Hogan’s case. Typically financiers paying the cost of litigation do so in return for a large portion of the settlement or judgment, generally between 20 and 40 percent.

Thiel’s financing of the Gawker case was disclosed after the fact; most courts around the world do not require that the presence of a third party funder be made known during the litigation. But transparency matters, because outside financing can influence the case itself. Should funders have a say in whether claimants fight in court or settle? Should they have a say in how much they should settle for? And does the interest of the funder trump what is right for the litigants? How much say should a financier have over case strategy? Where funders are financing whole law firm case portfolios, what is the extent of their control over the law firm and who are the law firms really working for? Will the amount of damages awarded be different if the judge knows that a portion of the award will go to a third party?

The old legal doctrines of “champerty and maintenance” used to make hidden support for cases illegal in the UK. “Maintenance” is improper meddling of a disinterested party to support or encourage litigation; “champerty” is the process by which a disinterested party obtains a share in the proceeds of litigation. However, the concepts of “champerty and maintenance” have been eroded in the UK, and TPLF is now increasingly common. This is not so in every jurisdiction though:  some still maintain that this sort of support for litigation is harmful to the public interest and prohibit it. Ireland’s High Court had the opportunity to consider these issues in detail in a recent case involving Persona Digital Telephony Ltd. The Court decided in April that the concepts of maintenance and champerty continue to have a “practical vibrancy” and that litigation funding remains contrary to public policy, and is therefore an abuse of court process in Ireland.

Thiel likely could not have funded the Hulk Hogan case in Ireland; his involvement probably would have fit the definition of maintenance. Many jurisdictions have abolished or limited these doctrines. Yet, the practical and ethical dilemmas they sought to address remain. Worse, these dilemmas are impossible to solve when the existence of funding arrangements is hidden from the court and parties during litigation. Without adequate gate-keeping on TPLF practices, funding will continue to create and foster more litigation and leave these questions unanswered.