Media and Journalism

Would The English Rule Have Saved Gawker From Peter Thiel?

As Gawker enters the dustbin of history, people still don't seem to understand Peter Thiel's strategy.

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Hulk HoganPeter Thiel has buckets full of cash and a genuine beef with Gawker — or at least Valleywag — so maybe there really wasn’t anything that was going to slow down his relentless drive to shutter the blog. But in the aftermath of Gawker’s demise, people seem to misunderstand the strategic brilliance of the billionaire’s “secret war” with the website. He literally couldn’t lose no matter what happened because his strategy never required one big leg drop of a win from Hulk Hogan. See, what people don’t seem to get about how this played out is that Thiel’s strategy had absolutely no downside because it wasn’t founded upon taking down the company with one stroke, as much as it rested upon a steady stream of lawsuits — Thiel wouldn’t give details but admitted to funding others — chipping away at the company and its insurer doling out legal fees to dispense with cases. He could render the company uninsurable and constantly cash poor by just keeping up the pressure. This was a war of attrition that stumbled upon a nuclear bomb.

It’s also a strategy that could only really succeed with the American system of allocating legal fees.

Under the “English” system (more accurately the “basically everybody but the U.S.” system), where the loser pays the legal fees of the victor, Thiel would’ve eaten Gawker’s costs for every case he backed but lost and Gawker’s insurers wouldn’t have been on the hook for running up costs dealing with these other matters. His secret war actually would’ve required the blockbuster win to succeed, which is obviously a lot riskier than taking your chances on a lot of matters. But in America, merely outlasting Gawker’s carrier by running up so many legal bills that the company became impossible to insure is a path to victory. If someone’s rich enough, in America they literally can win for losing.[1]

Why does the U.S. persist with a system designed to allow non-meritorious (but not sanctionably frivolous) claim to sting the party in the right? NYU Law Professor Oscar Chase explained, “the ‘American rule’ is defended on the grounds that ordinary people would always be afraid to sue if they thought they would have to pay the defendant’s lawyer fees.” Representing the powerless on contingency is one thing, but having to suck up Goliath’s legal fees on the back end would put fear into many a plaintiffs’ lawyer. It’s no surprise that conservative organizations like the Manhattan Institute can’t preach enough about the need for a “loser pays” rule in America. Imagine all those businesses who could avoid litigation![2]

But Thiel’s anti-Gawker strategy presents the flip side of that coin. If you want to keep the system open for the little guy or gal, then you have to accept that the deep pocketed plaintiff (or those he’s willing to fund) can murder an adversary by a death of a thousand cuts as long as they stay on the happy side of Rule 11 (or its state equivalent).

So could the English Rule have kept Thiel on the sidelines? Perhaps. He certainly wouldn’t have had a plan B if the perfect case never materialized — or if the Florida trial court bothered to read the appellate court’s decision on newsworthiness — but he has enough money to pay a lot of Gawker legal fees and seemed more than willing to part with large sums to mount Gawker’s head over his mantle.

We’ll never know, but it’s an interesting thought experiment.

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[1] Attorney John R. Parker Jr. wrote over at Jacobin about the other “can’t lose” aspect of Thiel’s strategy — that taking plaintiff’s work out of the hands of a lawyer working on contingency fed a scorched earth mindset only available to the super-rich.

[2]Though there’s an alternative way of looking at the English rule. Political Science professor Herbert Kritzer notes that making the loser pay has actually made things more expensive by encouraging potentially meritorious claims over frivolous sums because the incentives to settle are reduced.

Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

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