Do good engineers take their salary entirely in equity? In both cases, despite high payoffs, there is extreme variability in outcome. Running a serious lawsuit is very expensive.
Accepting funding from an outside party reduces the risk of making nothing, but eliminates the big payoff. Most serious law firms wouldn't take that deal.
Was the firm in this case very small? That's the only way this rumor would make sense. Even then, why wouldn't Thiel just point the Hulkster to a big law firm that could handle the case without help?