Peter Thiel proves Silicon Valley only hates lawsuits when it’s the one getting sued

Man with a motive.
Man with a motive.
Image: Reuters/Yuri Gripas
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Silicon Valley purports to hate the legal system. To hear the tech world tell it, lawyers are leeches and regulations are mostly outdated. Lawsuits stifle innovation and waste money that startups could better spend developing products and recruiting more users, thereby making the world a better place.

But this contempt for the legal system is deeply hypocritical: It exists only insofar as the law is used against tech. As Peter Thiel’s recent attempts to take down Gawker Media demonstrate, Silicon Valley billionaires are more than happy to use the law to further their own interests.

News broke earlier this week that Thiel, a billionaire entrepreneur who co-founded PayPal, has been funding a lawsuit against Gawker on behalf of Terry Bollea, better known as Hulk Hogan. Hogan—and therefore Thiel—won the suit in March and was awarded $140 million by a Florida jury. The decision is being appealed.

Perhaps Gawker had it coming: The online publication had published a sex tape of Hogan without his consent. Thiel suggested to The New York Times that his motives were largely altruistic. “They usually attack less prominent, far less wealthy people that simply can’t defend themselves,” he said.

But it seems clear that what brought Thiel into the ring with Hogan was a desire to settle a personal score with a company that tried to out him as gay back in 2007. It’s one thing to resent a company (and here, Thiel’s resentment is entirely understandable). It’s another thing to pay a team of lawyers to push a publication to the brink of financial ruin. And the same lawyer who sued Gawker on Hogan’s behalf has now launched two new lawsuits against the site.

What Thiel’s example reveals is that tech execs don’t actually dislike lawsuits. They just don’t like to be sued. They have gone to great lengths to restrict the public’s right to litigate against them. Meanwhile, tech companies are free to litigate whenever it serves their own interests, even if that means abusing their power and making use of the legal system for purposes it was never intended to serve.

Thiel has the right to fund Hogan’s lawsuit. Funding someone else’s litigation is generally permitted because it can widen democratic access to the courts. An injured plaintiff receiving litigation finance, for example, might be able to afford the legal fees of a full case instead of settling it quickly and cheaply.

But it seems like a stretch to argue that Thiel brought the suit against Gawker to help out the little guy. The lawyers for Hogan even narrowed the scope of the lawsuit to make sure that Gawker’s insurance company wouldn’t pay for its defense, the better to put the publication on ice.

Using the court system to settle a score is nothing new for the tech elite. After Facebook defeated Paul Ceglia’s 2010 lawsuit claiming that Ceglia owned most of the company, Facebook, presumably at Mark Zuckerberg’s direction, launched its own lawsuit. This was directed not at Ceglia, but at the law firms that represented him, including DLA Piper and Milberg. The lawsuit was dismissed by the New York appellate court last December, but its message was clear: Don’t mess with Facebook. They’ll bite back.

Now imagine the damage Zuckerberg could do if he borrowed a page from Thiel’s playbook and funded a flood of lawsuits, filed on behalf of third parties, against Gawker. Or Fox News. Or Aaron Sorkin. Is there any media outlet Zuck couldn’t effectively silence, if not outright destroy?

Meanwhile, as tech companies flex their legal muscles, they’re doing everything they can to insulate themselves from legal fights brought by consumers. They spend gobs of money lobbying to kill state laws that impact them (including recent efforts in Michigan, Illinois, and Alaska). They litigate with each other over patents incessantly, but they call patent lawsuits “patent trolling” and fight the right of individual inventors to sue them. (Silicon Valley lobbying has contributed, by the authors’ count, to at least eight different “patent reform” bills currently before Congress.)

Tech companies in San Francisco routinely cycle through retainer agreements with every major law firm in the city, ensuring that those law firms can never represent consumers in disputes against them. They pushed the federal courts to uphold unconscionable consumer arbitration agreements, under which consumers often have no choice but to sign away their right to sue the companies. Just last year, they argued a trio of cases to the Supreme Court in an effort to forever rid themselves of class-action lawsuits (Campbell-Ewald Co. v. Gomez, Tyson Foods, Inc. v. Bouaphakeo, and Spokeo, Inc. v. Robins).

That effort, thankfully, went nowhere. But we probably haven’t seen the end of Silicon Valley’s self-serving use of the legal system—or the self-serving story tech execs tell to hide their guilt.