Two Money Questions re: the Thiel/Gawker Situation

August 19, 2016 1:07 PM

1. Any speculation as to whether Peter Thiel would share in (or entirely commandeer) Hulk Hogan's award from the litigation Thiel paid for? If so, how would this have been locked in (given that the check will surely be cut in Hogan's name)? Via private contract at the time Thiel started paying, or via handshake, or...? 2. Will Nick Denton likely make anything at all from the Univision sale? Or would this probably be a total wash for him, personally?
posted by Quisp Lover to Work & Money (8 answers total)

1. What you are describing is called "champerty" and was traditionally banned in most common law jurisdictions. However, that's not longer the case in many jurisdictions. If Florida is a jurisdiction in which champerty is now okay, which I think is the case, then the deal would likely be done in a formal, written contract between Thiel and Hogan. (I have no idea whether Thiel and Hogan actually made such a deal. It would make business sense, but Thiel's focus has been more personal from what I've seen in the press.)

2. Equity holders, like company founders who hold stock in a company, usually lose everything in bankruptcy. I think the one way he could make out would be if the Hogan verdict gets overturned on appeal such that Gawker's debts decline dramatically and more than enough was recovered to fully pay all those debts.
posted by Alluring Mouthbreather at 1:27 PM on August 19, 2016 [1 favorite]

Response by poster: Thanks, I didn't know the term or concept of champerty. Sounds like restoring laws banning this would remove at least one major avenue for super-rich to stifle the press, generally.
posted by Quisp Lover at 1:41 PM on August 19, 2016

It is highly likely that Thiel's investment was structured as a loan to Hogan, to be repaid from proceeds of the case, or to Hogan's lawyer, to be repaid from the lawyer's contingent fee, with interest in both cases.
posted by MattD at 1:55 PM on August 19, 2016 [1 favorite]

why is it "highly likely..." (is this just speculation or is there some information)?
posted by andrewcooke at 2:25 PM on August 19, 2016

I am not a bankruptcy attorney.

Regarding the Nick Denton portion of the question, he's filed for personal bankruptcy as of August 1. The personal bankruptcy petition lists assets of over $10 million, but liabilities of over $100 million.

Denton is the shareholder, president and CEO of Gawker Media Group, and the President of Gawker Media, LLC, which also filed for Chapter 11 bankruptcy.

The way Chapter 11 works is that the secured creditors get paid off first; then the unsecured creditors. With his judgment from the lawsuit, Hulk Hogan is the largest unsecured creditor, and I believe (but am not sure -- I'm not a bankruptcy attorney) that his claim is a priority claim.

There aren't enough assets to pay off all of the unsecured creditors, so they're gonna take a haircut. The odds that there will be money leftover for Gawker Media's shareholder? Yeah, pretty much zero.
posted by QuantumMeruit at 2:29 PM on August 19, 2016

According to this webpage, Florida has abolished its prohibition against champerty.

"Still other states have explicitly abolished their ancient champerty rules, including Florida and Massachusetts."

(Disclaimer - the company who posted that info makes a business out of financing the lawsuits of others.)
posted by w0mbat at 3:16 PM on August 19, 2016

The important thing to remember is that Mr. Denton needs no personal wealth to start up again. He has everything he needs to start up with pretty minimal hassle except brand development. But, The Toast folded and he might want to jump into that as a redevelopment project, the site got really precious in the last year and its ending really reminded me of the demise of Gourmet magazine. I hope he decides to move to an established site like XOjane and do great things there. It's probable that Mr. Denton has many ideas sitting around. He reminds me of Tyler Brulé for his enthusiasm to start projects. If Nick is reading this, look for an issue of Spruce, Mr. Brulé's early attempt at Monocle from 2000. Mr. Denton is a good publisher. The fact that Gawker sites were running the 2007 Peter Thiel article today was emblematic of Univision's support for Mr. Denton, and its explicit interest in figuring out what the assets are worth independent of their human resource capital.
posted by parmanparman at 4:50 PM on August 19, 2016 [1 favorite]

Response by poster: To sum up, a case has been made that there's a mechanism (FL's permission of champerty) for Thiel to be repaid, and speculation that it might be structured as a loan. If I were Thiel, I'd want more ROI than simply repayment of the legal fees, given the enormity of the award (fully recognizing that Thiel was primarily motivated by personal interest in seeing Gawker punished).

But I suppose it's impossible to say how it might have been arranged, or how Hogan would be compelled to pay back more than what was put up. I guess we'll just have to wait and see if Hogan buys a McLaren....
posted by Quisp Lover at 7:07 PM on August 19, 2016