After the revelation that PayPal co-founder Peter Thiel bankrolled Hulk Hogan’s lawsuit against Gawker — which landed the pro wrestler a $140 million jury verdict — some of the largest litigation finance companies are on the defensive.

“It is uncommon,” said Jim Batson of Bentham IMF, of Thiel’s financing of the suit.

Thiel, one of the earliest investors in Facebook, had a bad history with Gawker: The media company published an article in 2007 outing him as gay. In an interview with The New York Times, he said “it’s less about revenge and more about specific deterrence.”

“I saw Gawker pioneer a unique and incredibly damaging way of getting attention by bullying people even when there was no connection with the public interest,” said Thiel.

Thiel’s acknowledgement of his role in Hogan’s lawsuit, which sought damages against Gawker for publishing a bootleg sex tape he starred in, caused a backlash in the media who said that his actions set up a dangerous precedent where any rich person dissatisfied with media coverage can fund litigation against the news business.

Many media commentators also criticized the business of litigation funding, conflating the practice of investing in lawsuits for profit, with the funding of an individual case by someone who is personally motivated.

Michael Hiltzik of the L.A. Times wrote :

Thiel’s reported involvement with the lawsuit raises disturbing questions about the possible use of litigation aimed at putting a defendant out of business for spite. But it also points to an ever larger issue — the spreading business of litigation finance, in which investors put up money to support a lawsuit in exchange for a piece of any recovery.

In some respects the practice resembles the ancient common law crime of “champerty,” which amounted to buying an interest in the gains from a lawsuit. In Britain and the U.S., legal prohibitions against champerty and related offenses fell away. That was largely because the development of professional ethics in the law was thought to have the same effect of discouraging frivolous lawsuits.

But executives of litigation finance shops who have work in this space — to no surprise — see it differently.

“We certainly make our investments based on objective criteria,” said Batson, of Bentham IMF. "We have a duty to add value to our shareholders. We wouldn’t be doing a very good job at that if we let personal interference assess [the litigation].”

Instead, Thiel’s involvement in the Hulk Hogan case comes from a single investor’s personal interests rather than a traditional litigation finance business, which seeks to invest in lawsuits based on probability of success and return on investments.

Batson, however, said that Thiel’s financing of the Hogan case still illustrated the importance of litigation finance as a business. Thiel is said to have spent $10 million to back the case.

“It enabled (Hogan) to go forward,” said Batson. “For whatever Peter Thiel’s intention may be, he funded a meritorious lawsuit. Hey, that’s great. That’s what we believe in. Everybody should have a fair fight.”

He disagreed with media critics who said that the case opens up the possibility of other wealthy individuals seeking vengeance on media companies that give them bad press. He said Hogan’s case was different because it was grounded in claims that held up in court.

“To go to trial, that case had to survive all sorts of motions to dismiss. A judge had to reach a point in the litigation to decide that it was strong enough to be heard, and a jury thought it was strong enough to be awarded millions in damages.”

“Footing frivolous lawsuits,” he said, “that would be an abuse of the court system.”

Chris Bogart, CEO of Burford Capital, wrote on his company’s blog post Thursday that the ordeal has caused some media outlets to talk about litigation funding “as though it only comes in one flavor.”

“That isn’t so,” said Bogart. “There is an extraordinary amount of litigation funding going on in our justice system, and has been for a long time.”

From Bogart’s blog:

Indeed, the litigation system is designed expressly to permit such funding (and not to require its disclosure, for sound policy reasons), and it would grind to a halt without it. What Burford and other commercial litigation financiers do is part of a large and pretty boring business around commercial litigation – businesses suing each other. Other players in that world include insurers (the largest litigation funders around), banks, creditors, investors and corporate affiliates. Burford exists because there is significant demand from corporate clients for financial solutions to ever-rising litigation costs and capital, and Burford leads the way in meeting that demand in a professional and responsible manner.

That world is miles away from professional wrestling, sex tapes and “revenge litigation”. We don’t have anything to do with that other, more salacious world.

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For more on how litigation finance works, watch Bogart explain to Big Law Business in this video.