- Irony alert: Get-money-out-of-politics measure passes 53-47 in Howard County, Md. after backers outspend foes 10-1 [Len Lazarick, Maryland Reporter]
- “Hershey’s Scoffs At Class Action Over Amount Of Kisses In Bags” [Dee Thompson, Legal NewsLine/Forbes]
- Philippines bar responds after president Duterte menaces lawyers of drug suspects [Tetch Torres-Tupas/Inquirer, InterAksyon and letter]
- What should Trump do re: conflicts? Richard Painter and David Rifkin discuss [Federalist Society podcast; earlier]
- Massachusetts Attorney General Maura Healey, lately seen in this space using subpoena power to go after political adversaries who hadn’t taken a dime from ExxonMobil, also known for curious assault on gunmakers [David Meyer Lindenberg, Fault Lines]
- “N.Y. Top Court Rules Litigation Finance Transaction Violates Champerty Doctrine” [Kevin LaCroix, Alison Frankel on Justinian Capital SPC v. WestLB AG] “An epic legal battle with big implications for litigation funding” [The Economist on Liberian insurance claims against Cigna]
- No, the “government can’t make you use ‘zhir’ or ‘ze’ in place of ‘she’ and ‘he'” [Josh Blackman, Washington Post; earlier on NYC human relations commission guidelines; Hans Bader/CEI on new D.C. rules along similar lines]
- Matt Welch on New York Attorney General Eric Schneiderman and the “casually authoritarian” movement to harass and legally penalize climate deniers [Reason] While styled as fraud probe, AGs’ climate denial investigation is essentially a SLAPP suit meant to silence advocacy [Ronald Bailey; letter from 13 attorneys general critical of probe] As one skirmish ends, expect wider war to continue, as Virgin Islands AG withdraws widely flayed subpoena against our friends at Competitive Enterprise Institute [John Sexton] Massachusetts Attorney General Maura Healey now chasing “right-leaning groups that have never received a penny from Exxon” including local political foe Beacon Hill Institute [Hans Bader/CEI] We’re the ones asking questions around here: AGs dodge public record/FOIA requests on probe [Chris Horner/Fox News]
- “N.Y. Senate passes bill banning funding for university student groups that ‘encourage’ ‘hate speech'” [Eugene Volokh]
- Licensing and other laws often restrict what members of professions and occupations can say, a problem that deserves more and better First Amendment scrutiny than it’s gotten [Timothy Sandefur, Regulation]
- Ninth Circuit will review ruling striking down Idaho ag-gag law [Baylen Linnekin on appellate amicus, Idaho Statesman, NPR last year]
- Ken White on why it’s okay to loathe Gawker and its actions but still see the danger in Thiel/Hogan episode [L.A. Times, related Dan McLaughlin, earlier]
The discovery that systematic lawsuit campaigns can be aimed at the press, and not just against every other institution, might be reason to rethink litigation-as-weapon [Gordon Crovitz, Wall Street Journal]:
Walter Olson, author of “The Litigation Explosion” (1991), explained in his Overlawyered.com blog that Mr. Thiel’s approach was predictable after maintenance “metamorphosed around the 1960s into what we now know as the public interest litigation model: foundation or wealthy individual A pays B to sue C. Since litigation during this period was being re-conceived as something socially productive and beneficial, what could be more philanthropic and public-spirited than to pay for there to be more of it?”
With maintenance decriminalized, Mr. Olson warns, “It will be used not just against the originally contemplated targets, such as large business or government defendants, but against a wide range of others—journalistic defendants included.”
The Peter Thiel/Hulk Hogan story has brought the topic of litigation finance into the news, and a recent Alison Frankel column notes an alleged secret $10 million investment in the BP gulf spill case that might possibly have served as overstimulus: “Most of 40,000 seafood workers …turned out to be phantom clients…one, famously, was actually a dog.” [Reuters]
Davey Alba and Jennifer Chaussee at Wired quote me on Peter Thiel’s financing of the Hulk Hogan lawsuit as part of a campaign to take down Gawker Media (earlier here, here). The episode, which follows Frank VanderSloot’s announcement that he wishes to devote $1 million to endowing a fund for lawsuits against the “liberal press,” is likely not to be the last such, and I speculate on a nightmare scenario in which multiple clearinghouses claiming the public interest banner (and presumably based on tax-deductible donations) get up and running with the objective of taking down various sectors of the press disliked by one group or another.
Related: I’m a bit surprised that the successful legal takedown of the tawdry 1950s-era Confidential magazine, told in Henry Scott’s book Shocking True Story, hasn’t figured in more Gawker coverage. Megan McArdle at Bloomberg View weighs in on various aspects of the Thiel/Hogan story, and as usual is worth reading. Max Kennerly has a detailed analysis of legal issues in the coming Hogan v. Gawker appeal [earlier on verdict] And a flashback: how the late Lehman Brothers got in a ton of trouble by dabbling in champerty.
There has been much coverage of the revelation that Peter Thiel has funded Hulk Hogan’s lawsuit against Gawker behind the scenes, especially following the Silicon Valley figure’s acknowledgment that he views taking down the notoriously scurrilous publisher as a public service (“one of my greater philanthropic things that I’ve done”) and has sought out and funded other litigants besides Hogan in order to make that happen. As I said in my explainer the other day, the decay of age-old rules against outsider funding of litigation (“champerty and maintenance”) is a broader trend that has left many sectors of society more exposed to the dangers of litigation, with the press just the latest.
I’m quoted by Alison Frankel in her Reuters column on this (“Our ancestors were not complete fools,” I say) and by Timothy Lee at Vox (“‘Some people following the Thiel story appear to be surprised that these weapons can be used by rich and powerful people in order to get their way,’ Olson tells me.”; also see Ezra Klein’s piece). And Lee recounts a recent episode that passed with little notice at the time:
Last year, the liberal magazine Mother Jones defeated a defamation lawsuit filed by Republican donor Frank VanderSloot. Winning the lawsuit cost Mother Jones, a relatively small nonprofit organization, and its insurance company $2.5 million in legal fees.
If VanderSloot’s goal was to punish Mother Jones for writing an accurate but unflattering story about him, a loss was almost as good as a victory. His lawsuit sought $74,999 (staying just under the $75,000 threshold that would have allowed Mother Jones to move the case to federal court and away from an Idaho jury that might have favored the hometown plaintiff). So “winning” the lawsuit cost Mother Jones 30 times as much as the amount it would have had to pay if it had lost.
What was really ominous was what happened after VanderSloot’s loss. He “announced that he was setting up a $1 million fund to pay the legal expenses of people wanting to sue Mother Jones or other members of the ‘liberal press.'”
Of journalists raising the alarm about the Thiel episode, Josh Marshall notes that unlike the usual pattern of litigation by wealthy persons against the press, in which the plaintiff must undertake some risk of reciprocal damage through discovery and bad headlines, the Thiel model allows the one in the background with the grudge to inflict hurt at little risk except financial to himself. “If Thiel’s strategy works against Gawker, it could be used by any billionaire against any media organization,” argues Felix Salmon.
Meanwhile, some other writers echo the point I made about how, once funding other people’s lawsuits for ideological reasons came to be applauded as public interest law, it was unlikely that the weapon would not be used against the full range of targets including the press. Tyler Cowen tries putting the shoe on the environmentalist foot, while Eugene Kontorovich at the Volokh Conspiracy observes that “Thiel’s conduct fits into the ‘public interest’ or ‘ideological’ litigation paradigm” and claims that “By current standards, Thiel’s funding should raise no eyebrows — unless one also wants to revisit public interest litigation, class actions and contingent fees.”
You know what? Maybe it’s time we did revisit those things, including the ideological litigation paradigm. And Andrew Grossman has a tweetstorm and exchange with Kontorovich that comes closer to capturing my own mix of feelings on the subject.
[Wrestler Hulk Hogan’s lawsuit against Gawker Media over its publication of a sex tape resulted in a Florida jury’s award of $140 million against the widely loathed journalistic entity. There had been rumors that someone staked Hogan the money to sue. Now, Ryan Mac and Matt Drange in Forbes write that anonymous sources have told them the hidden funder was Silicon Valley libertarian Peter Thiel. The article does not make clear whether, if the reports are true, Thiel stands to gain a share of the suit’s proceeds, or was acting from dislike of Gawker.]
At common law, funding another’s lawsuit was “champerty” if done for a share of the proceeds and “maintenance” if done for the hell of it. Both were unlawful at common law (as was “barratry,” the stirring up of litigation whether or not resources were advanced for its prosecution) but as I discussed in The Litigation Explosion (1991), the old common law rules have fallen into general disuse. What rules still remain vary from state to state, often taking the form of rules specifically governing what lawyers and their associates can do (which will often leave non-lawyers free to carry on the same acts.)
Champerty and maintenance rules both came under attack from legal academics and influential commentators during the general rise of pro-litigation sentiment in the decades after 1950, and were dismissed as outdated and ethically wrongheaded. The path was different in each case, however. In the case of champerty, the rise to acceptance of the lawyer’s contingency fee, as a wholesome prescription for the general case rather than a necessary evil in special kinds of cases, tended to erode disapproval of champerty: if there was nothing at all wrong with lawyers taking a share in claims, why not invite others to do so too? As an internet search on the phrase “litigation finance” will quickly show — or a glance at a tag on the subject at Overlawyered — third-party financing of lawsuits has become a booming and largely unregulated business in the United States and a few other nations, even as champerty remains unlawful in many other countries. The U.S. Chamber of Commerce, believing that litigation finance is likely to fuel the volume of lawsuits, has fought for restrictions on the practice.
Maintenance, on the other hand, metamorphosed around the 1960s into what we now know as the public interest litigation model: foundation or wealthy individual A pays B to sue C. Since litigation during this period was being re-conceived as something socially productive and beneficial, what could be more philanthropic and public-spirited than to pay for there to be more of it? So what had been stigmatized or even illegal not long before soon emerged as the most admired kind of legal practice.
Once the old ethical qualms about champerty and maintenance fall, it seems unlikely that they will be revived only as to some causes or persons. Funding someone else’s lawsuit for ideological reasons, long perceived as a dangerous stirring up of social conflict that might otherwise have remained at rest, is now applauded as a means of holding powerful institutions accountable, ensuring wronged parties their day in court, and so forth. Inevitably, once all parties grow comfortable with this tool, it will be used not just against the originally contemplated targets, such as large business or government defendants, but against a wide range of others — journalistic defendants included.
- “Is Arbitration Awful? The New York Times Thinks So.” [New Jersey Civil Justice Institute, earlier here and here] And speaking of that paper, I’m going to miss Joe Nocera’s incisive coverage of the litigation business in his column, often linked here; he’s off to other duties at the Times [Politico/New York]
- Yet more from the Times, longread on litigation investing and champerty: “Should You Be Allowed To Invest In a Lawsuit?”
- Mikal Watts through the years: “It was part of my strategy to affect the stock price, which I was very successful at.” [Madison County Record, more]
- “No negligence liability for injuries by fellow players in contact sport” [Eugene Volokh, martial arts, Colorado Court of Appeals]
- Defense lawyer claims adversary had advance word about jury deliberations, grabbed $25 million settlement [Chicago Law Bulletin]
- Is data privacy the next source of mass lawsuits? [Chamber Institute for Legal Reform]
- Funds needlessly drained: “Asbestos reforms needed to protect first responders and veterans” [Rep. Blake Farenthold, The Hill]
- Surprised this story of interstate lawsuit exposure hasn’t had national coverage: “Texas docs threaten to stop seeing New Mexico patients” [Hobbs, N.M., News]
- More on the Daraprim episode and the fiasco of FDA generic-drug regulation [Watchdog, earlier here and here] More: Ira Stoll/N.Y. Sun;
- Warrants, HIPAA be damned: Drug Enforcement Administration agents pose as Texas medical board to get at patient records [Jon Cassidy/Watchdog, Tim Cushing/TechDirt via Radley Balko]
- Litigation finance and champerty: the reaction is under way [MathBabe, earlier on pelvic and transvaginal mesh surgery speculation]
- No longer alas a surprise to see JAMA Pediatrics running lame, politicized content on topics like “youth gun carrying” [Jacob Sullum]
- “Shame, blame, and defame”: in alcohol regulation as in other public health fields, government-funded research can look a lot like advocacy [Edward Peter Stringham, The Hill]
- More adventures in public health: study finds dry counties in Kentucky have bigger problems with methamphetamine [Christopher Ingraham, Washington Post “WonkBlog”]
On Thursday I was a panelist at the Federalist Society National Lawyers’ Conference discussing the rapid rise of litigation funding — specifically, well-capitalized firms that advance money to plaintiffs in commercial high-stakes litigation, often in exchange for a share in the proceeds. (A separate wing of the litigation finance business, which was not the panel’s primary focus, advances smallish sums to individual injury plaintiffs at high interest rates in a sort of analogue of payday lending.)
My opening remarks speculate about the future emergence of divorce trolls — excuse me, “marital rights assertion entities” — set up to buy out an ex-spouse’s stake in ongoing matrimonial strife and play it for maximum extraction value. While no one has yet rolled out that kind of business model, note that outside financiers have indeed begun to fund divorce litigation.
More seriously, I went on to argue that the rise of patent trolls and mass tort operations prefigures problems we are likely to see emerge from litigation finance, from the encouragement given to low-value claims to a settlement process skewed by the interests of the funders rather than the original disputants, and suggest that the age-old rules against champerty, maintenance and barratry might owe something to an appreciation of such dangers. A link to the video is here.
More: Check out Roger Pilon’s post on what else Cato people were up to at the Mayflower last week.