A New Approach to Litigation Funding

Up until now, almost all third-party litigation funding came from investors who sought to gain directly from the recovery in the litigation. But, as litigation finance grows and expands, new approaches to litigation funding are emerging.  One recent development comes from the home rental platform, Airbnb.

In New York City, officials fined an Airbnb host $30,000 after he appeared at a city council meeting to speak out in support of home rentals.  The host sued the city in federal court, accusing officials of retaliating against him for expressing his opinion. Airbnb then volunteered to pay his legal fees in the case.

The timing of the suit is noteworthy. It was filed just hours before the New York City council was expected to pass a bill requiring Airbnb and other home-rental sites to disclose the names and addresses of hosts. The bill is designed to facilitate New York’s ability to enforce its rules against short-term home rentals. Airbnb opposes the measure, asserting that it would invade the privacy interests of law-abiding hosts.

Not surprisingly, Airbnb’s participation in this suit is not the first time it has had some conflict with New York city government. In 2016, it sued both the city and New York state over their restrictions of short-term sublets. Just before the city’s consideration of a disclosure rule, Airbnb and the city council engaged in a public battle over whether Airbnb’s business was good for the city’s housing rental market.

Airbnb’s support for its host’s lawsuit is a new variation on an established theme in litigation finance. In 2016, billionaire Peter Thiel funded a suit by Hulk Hogan against the gossip website, Gawker. But Thiel sought to keep his involvement secret; Airbnb’s funding is out in the open. And that is what is interesting about this case. Airbnb is using funding as an instrument in its on-going, public dispute with the city. This willingness to be public about litigation finance is another indication of the greater acceptance of litigation finance.

Keywords:  litigation finance, legal reform, third-party funding, Peter Thiel, Airbnb

Works Cited:  Olivia Zaleski, Airbnb Is Financing a User’s Lawsuit Against New York City, Bloomberg (July 18, 2018) available at https://www.bloomberg.com/news/articles/2018-07-18/airbnb-is-financing-a-user-s-lawsuit-against-new-york-city