Enter to open, tab to navigate, enter to select
Hulk Hogan Wrestles Gawker With Third-Party Litigation Financing
Practical Law Legal Update w-002-5465 (Approx. 5 pages)
Hulk Hogan Wrestles Gawker With Third-Party Litigation Financing
by Practical Law Litigation
| Law stated as of 13 Jun 2016 • USA (National/Federal) |
The name Hulk Hogan used to be synonymous with wrestling in the ring. But now, the Hulk, a/k/a Terry Bollea, may be more famous for pinning down online media giant Gawker Media LLC (Gawker) in the courtroom with the help of third-party litigation financing from PayPal co-founder and Silicon Valley billionaire Peter Thiel. A Florida state court jury awarded Bollea over $140 million in March as a result of Gawker publicizing on its website a sex tape involving the former professional wrestler. Gawker has appealed the ruling, and in an apparent effort to avoid paying Bollea, also has filed for bankruptcy. Although Bollea's most recent win occurred in state court, his legal battles against Gawker began in federal court in 2012, and have an extensive and interesting procedural history.
In October 2012, Terry Bollea, a/k/a Hulk Hogan, sued Gawker Media LLC (Gawker) in federal court seeking a preliminary injunction. Bollea sought to force Gawker to remove excerpts of a sex tape involving Bollea that Gawker posted on its website, and to enjoin Gawker from posting, publishing, or releasing any portions or content of the tape to the public through any website. The district court rejected Bollea's arguments, which he based primarily on privacy concerns, and denied his motion after analyzing the requisite factors for preliminary injunctive relief (see Bollea v. Gawker Media, LLC, (M.D. Fla. Nov. 14, 2012)). (For more on the factors federal courts use to decide whether to grant injunctive relief, see Practice Note, Preliminary Injunctive Relief: Initial Considerations (Federal).)
During the lawsuit, Bollea registered the copyrights to the sex tape and filed an amended complaint alleging copyright infringement, as well as a second motion seeking the same injunctive relief on the basis of his copyright claim. The district court once again denied Bollea's request for injunctive relief (see Bollea v. Gawker Media, LLC, 913 F. Supp. 2d 1325 (M.D. Fla. 2012)). Bollea later voluntarily dismissed the federal case, which the district court closed on January 3, 2013. (For a sample stipulation of dismissal with helpful drafting tips, see Standard Document, Stipulation of Dismissal.)
Bollea then sued Gawker in Florida state court, asserting essentially the same claims as in the federal court case. Gawker promptly removed the case to federal court, and Bollea filed a motion to remand (see Bollea v. Clem, 937 F. Supp. 2d 1344, 1348 (M.D. Fla. 2013)). In its fight to keep the case in federal court, Gawker, a New York-based company, argued that the district court had both:
- Diversity jurisdiction, because Bollea, a Florida resident, had fraudulently misjoined as a defendant fellow Florida resident Heather Clem (the other individual in the sex tape) to avoid federal court jurisdiction.
- Federal question jurisdiction, because the case involved claims under the US Constitution and the Copyright Act.
However, the district court rejected both arguments, and remanded the case in favor of Bollea (see Bollea v. Clem, 937 F. Supp. 2d at 1348). (For more on removal to federal court generally, see Practice Note, Removal: Overview. For more on remand from federal court, see Practice Note, Removal: Remanding the Case to State Court.)
As he did in federal court, Bollea sought a preliminary injunction against Gawker in state court. Bollea initially appeared to have better luck there, as the state court granted the injunction. However, the state court did not make any factual findings to support its decision at the injunction hearing or in its written order, and also failed to require Bollea to post a bond for the injunction as required under Florida law. Gawker successfully appealed. (See Gawker Media, LLC v. Bollea, 129 So. 3d 1196, 1199 n.2 (Fla. Dist. Ct. App. 2014).) The Florida appellate court addressed the interesting issue of whether collateral estoppel applied to the federal court's order denying Bollea's previous motion for a preliminary injunction on the same grounds, but ultimately reversed the injunction because it found that it was an unconstitutional prior restraint under the First Amendment (see Gawker, 129 So.3d at 1203-04).
The case proceeded to trial in state court, and Bollea's luck turned. In March 2016, the jury awarded Bollea a record $140 million dollars in damages, including punitive damages. However, Gawker has filed an appeal in Florida state court, which remains pending. On June 10, 2016, Gawker also filed for bankruptcy in the Southern District of New York (a copy of the voluntary petition that Gawker filed is available here).
As if a lawsuit involving Gawker's publication of a celebrity wrestler's sex tape did not make the case intriguing enough, perhaps the most surprising aspect of Bollea's battle came shortly after Gawker's appeal. In late May, PayPal co-founder and Silicon Valley billionaire Peter Thiel revealed that he helped finance the litigation against Gawker. An increasingly common practice in the US, third-party litigation financing (also known as alternative or external dispute financing) occurs when a party not affiliated with a lawsuit pays for another party's legal fees and costs to pursue that lawsuit. Typically, the non-party agrees to finance the lawsuit in exchange for a portion of any proceeds recovered in settlement or through collection of a damages award.
Practical Law has resources to help practitioners stay informed and current about litigation funding, including: