Imagine some political group runs an advertisement accusing a politician of misleading statements and covering up his true voting record. Instead of denouncing the attack or countering with a favorable ad, however, the candidate sues the political group for billions of dollars, launching a six-year, scorched-earth legal and public relations campaign.

Even though the legal battle collapses and the candidate spends about $100 million, the gambit works: The politician’s future elections are assured, because no rival or reporter dares publicly criticize the candidate lest they be sued.

An absurd example, no? Everyone knows it couldn’t happen here, in the home of the First Amendment and a free press. Yet a publicly traded company using its working capital to battle critics in court is an increasingly regular occurrence in the capital markets. Substitute a Canadian insurance conglomerate called Fairfax Financial Holdings for the politician, and you have an excellent example of the above scenario.

In July 2006, Fairfax sued a group of hedge funds and analysts over what it alleged was a conspiracy to drive down its share price. On Sept. 12 the last remnant of its once far-reaching suit was effectively tossed out of New Jersey Superior Court (though Fairfax has said it plans to appeal).

The courtroom debacle was ultimately an aside: For an estimated $100 million in legal and public relations fees over six years, Fairfax’s efforts drove its share price up, forced shorts to cover their trades and, save for a few reporters, ceased virtually all media investigation into the company’s operations. (To be fair, Fairfax’s share price was helped by a turnaround in the firm’s insurance businesses and billions of dollars in profit from a remarkably timed 2007 bet against subprime financial companies.)