Gawker – Beesquared

The battle between Gawker Media and Hulk Hogan may say as much as about paying for lawsuits as it does about winning them.

The company filed on Friday for Chapter 11 bankruptcy as part of a move to finance its appeal of a verdict in March that awarded the former pro wrestler $140 million for Gawker’s allegedly violating his privacy when it published a sex tape of him.

Peter Thiel, a billionaire co-founder of PayPal, bankrolled the lawsuit. Nine years ago, Gawker reported that Thiel is gay before – Thiel maintains – he had declared his sexuality publicly. The report continues to rankle, based on Thiel’s funding lawsuits against Gawker. Thiel says he’s “fighting back” on behalf of himself and others whom Gawker allegedly attacked. For its part, Gawker maintains that Thiel was out to his friends already by the time of Gawker’s piece.

The bankruptcy gives Gawker a mechanism to pay its legal bills, though it may result in the company’s managing partners relinquishing their ownership. The filing begins a court-supervised auction of Gawker’s assets, which include seven websites – among them Deadspin, Gizmodo and Lifehacker – that together had 44.4 million unique visitors in April. Ziff-Davis, a media company, has started the bidding at $90 million.

Both Thiel’s backing and Gawker’s filing shed light on some of the ways to raise capital for claims, though Thiel’s paying the Hulkster’s legal bills has produced consternation among commenters who see in the sponsorship an effort to punish the press.

“It’s a terrifying development for those of us who value a free, democratic media,” wrote Caterina Fake, a co-founder of the photo-sharing site Flickr, wrote on Quartz, referring to Thiel’s backing Hogan. “The laws of capitalism allow—and encourage!—the destruction of one company by another,” wrote Politico’s Jack Shafer, “But the proper jousting grounds for this sort of battle is the marketplace, not the courts.”

Ken Doctor, who analyzes the business of media, told the Financial Times that the financial pressures that led Gawker to file for bankruptcy will “make it even harder for the news media to grow, be profitable, and hold the powerful accountable.”

Still, as a matter of law or journalism there may be little to worry about. Despite the dustup over Thiel’s backing Hogan, the practice of financing other people’s lawsuits is completely legal. Litigants have long funded their claims with other people’s money, which can help to ensure your day in court when the stakes warrant pursuing a claim that exceeds the limits of your pocketbook.

In a story last fall for the Times’ magazine, Mattathias Schwartz chronicled the litigation-finance industry. He reported:

While the amount of litigation funded by outside financiers is still relatively small, the industry — which barely existed outside personal-injury cases until the mid-2000s — is growing rapidly, driven by increasingly permissive laws, the promise of high returns and hourly billing rates that run $500 or more for the largest and most sophisticated law firms.

As Eugene Kontorovich, who teaches law at Northwestern, wrote in The Washington Post following the revelation that Thiel financed Hogan, common law doctrines that prohibited recruiting or sponsoring others for litigation have drifted away over time. “Anyone who donates to the ACLU or a Legal Aid fund is basically underwriting third-party litigation,” he noted.

The chill that some commenters worry could come over newsrooms following the brushback by Thiel seems unlikely to materialize. Kontorovich reminds readers that regardless who pays the legal bill, “a court must also find the defendant liable, award damages and have it sustained on appeal.”

In short, you still have to prevail on the merits. And this battle is far from over.

“For all… the furor over Hogan’s case, there’s nothing especially novel about courts balancing privacy and First Amendment interests,” Alison Frankel at Reuters wrote in March. “Generally, the U.S. Supreme Court has concluded that in matters of public importance, the First Amendment trumps privacy.”

The “judgment was totally out of the range of any normal judgments of the last few years,” George Freeman, executive director of the Media Law Resource Center, told the FT.

In January, Gawker sold a minority stake to investment firm Columbus Nova as part of a plan to capitalize itself to defend against Hogan’s lawsuit. If Gawker prevails, the company’s owners could in theory buy back all or part of the company, depending on what they negotiate with the winning bidder in bankruptcy.

“To those who have offered support, thank you,” Gawker CEO Nick Denton wrote in a post published on Wednesday. “Gawker will be just fine, both in business and in spirit.”

Last Thursday, Gawker, an online site that tout’s “today’s gossip” as “tomorrow’s news,” published an item about a married male executive at a major media company who planned to hook up with a male escort in a Chicago hotel room.

As detailed in the post, the executive, who serves as chief financial officer of Condé Nast, called off the rendezvous after the escort, who realized the executive happens to be the brother of a former Treasury secretary, sent his would-be date documents tied to housing discrimination the escort claims to be facing in Texas.

The post drew a firestorm of criticism from readers, including from journalists. Critics condemned Gawker for outing the executive and for detailing an attempt by the escort, whom the piece identified using a pseudonym, to pressure the executive to hit up his brother for help.

A day after the post went up, Gawker took it down. The move marked “the first time we have removed a significant news story for any reason other than factual error or legal settlement,” Nick Denton, the site’s CEO, wrote in a statement. According to Denton:

“The story involves extortion, illegality and reckless behavior, sufficient justification at least in tabloid news terms. The account was true and well-reported. It concerns a senior business executive at one of the most powerful media companies on the planet… In the early days of the Internet that would have been enough… But the media environment has changed, our readers have changed, and I have changed… I believe this public mood reflects a growing recognition that we all have secrets, and they are not all equally worthy of exposure.”

The decision to remove the post prompted the resignation of both Gawker’s executive editor and the site’s editor-in-chief. Removing the post breached the firewall between the editorial and business sides of the house in a way that, in their view, undermined their responsibility to safeguard the site’s editorial integrity.

As Denton noted, the turnabout marked a departure for Gawker, which made its mark with pieces that sparked the downfall or discomfort of a series of public figures. In 2010, the site published an anonymous account of the author’s one-night stand with Christine O’Donnell, then the Republican nominee for the U.S. Senate from Delaware. (Though O’Donnell was a public figure, critics in and out of the media slammed Gawker for invading her privacy. Denton defended the post by pointing out that O’Donnell campaigned as a paragon of chasteness.) In 2011, former U.S. Rep. Chris Lee resigned after Gawker published an email exchange he had with a woman he met on Craigslist.

Hulk Hogan sued Gawker in 2012 for $100 million after Denton posted excerpts from a tape of the wrestler having sex with the wife of a friend. (The case is pending in a Florida court.) More recently, Gawker investigated whether Katie Holmes moved into a Manhattan apartment three years ago that linked via a secret entrance to a Whole Foods Market on the first floor. (She did, it seems.)

To its credit, the site punches up. In 2010, Gizomodo, a Gawker site devoted to tech news, revealed a lapse in Apple’s legendary security by reporting on a prototype of an iPhone 4 that the editors bought from someone who found it in a bar, where an engineer from Apple left it by accident. Last winter, Gawker took the lead in publishing a trove of emails from the hack of Sony.

At its best, Gawker knows how to “make fun of people and media sites without being overtly cruel,” Sarah Grieco wrote last year in the Columbia Journalism Review. At its worst, Gawker has a tendency to bully, according to Grieco, who cites Gawker’s claims that Shepard Smith, a Fox News anchor, is gay despite a dearth of evidence.

In defense of the discretion that Gawker demonstrates when it wants to, Denton has cited the decision not to publish nude photos of Jennifer Lawrence and other celebrities that leaked last year. The images may have been accurate, but they exposed no lie, Denton told Capital New York recently.

The piece about the CFO seems to be akin to the case of Hogan but with one difference. Hogan charges Gawker with invading his privacy. The video showed Hogan having sex but the act was private and recorded without his knowledge, he alleges. Gawker counters that the material is newsworthy, a position in line with the law, which generally protects reporters who ferret out facts that are not commonly known so long as they’re news.

Still, compared with Hogan, a celebrity who has boasted about his sexual prowess, the CFO of Condé Nast is an unknown. Sure, he works for a company that publishes The New Yorker, Vogue and other titles. But the person in charge of overseeing preparation of financial statements, managing Condé Nast’s financial strength or presenting the company’s creditworthiness has little to do with the content of its magazines.

At many news outlets, the executive suite tends to be a well-paid wing of the back office. And by most accounts, the current CFO of Condé Nast is about as far from the limelight as one can be. It’s also difficult to find a contradiction between his private behavior and public persona. He has no public persona.

Though Denton seems to have concluded as much the realization came too late to prevent the piece from going up in the first place. In a memo Monday to Gawker’s staff, he noted that the CFO story was legal but unworthy of the discretion afforded the editors who signed off on its publication. Writes Denton:

“We need a codification of editorial standards beyond putting truths on the Internet. [italics in original] Stories need to be true and interesting. I believe we will have to make our peace with the idea that to be published, those truths should be worthwhile. And some humane guidelines are needed — in writing — on the calculus of cruelty and benefit in running a story. Everybody has a private life, even a C-level executive, at least unless they blab about it. We do not seek to expose every personal secret — only those that reveal something interesting. And the more vulnerable the person hurt, the more important the story had better be.”

Time will tell if that’s a standard Gawker can uphold. Some members of Gawker’s editorial staff dispute both the viability of the criterion and Denton’s role in publishing the Condé Nast piece, which some in the newsroom say he could have killed up front had he found it as reprehensible as he contends.

Whatever the outcome, the test that Denton has articulated further defines the boundaries of publishing and privacy in a digital age. Highlight the disparities between the statements and actions of public figures. Clear the air of spin. Cover the news. And remember that stories are about people, too.