By: Jenna Connors
Crowdfunding, or soliciting money from third-parties via online platforms such as GoFundMe and Kickstarter, is a new way to fund costly litigation for legal and social battles that individuals, social groups, and small business would not otherwise be able to fund. Crowdfunding continues to have an important impact on litigation, such as access to justice issues and high unemployment rates. This kind of financing appeals to many lawyers, such as recent graduates looking to start a law practice without incurring serious debt or established attorneys seeking to aid a particular cause. However, this up-and-coming method, while ground-breaking, may have possible ethical repercussion for lawyers.
Advocates for crowdfunding have not been completely unaware of the rules of professional responsibility to navigate ethical challenges. More specifically, bar associations in a few states have offered some guidance for lawyers, although not completely on point, on ethical compliance with these rules in order to protect fee-splitting, client confidentiality, and preventing third parties from controlling the litigation.
For example, in 2015 the Philadelphia Bar Association’s Professional Guidance Committee (“Committee”) deliberated on a situation in which a lawyer wanted to use crowdfunding to finance litigation on behalf of a plaintiff who was suing a government entity. The plaintiff was unable to personally pay his attorney, but the lawyer himself suggested crowdfunding to help his client pay the attorney fees. The Committee had to decide whether the lawyer could accept this fee from someone other than her client because he needed to ensure that he was receiving informed consent from these donators. The Committee also had to ensure that the lawyer’s professional judgment was not compromised by this arrangement. Ultimately, the Committee decided that obtaining funds through crowdfunding would not cause the lawyer to “run afoul” of these rules as long as the funders were not under the impression that they would have any stake or control in the litigation.
The Committee also had to discuss the issue of client confidentiality. It was a given that the lawyer had to share certain information about this case to convince potential donators, but the clients also needed to give their consent on the information that is released. Further, the Committee clarified that the amount of information shared to potential donators should be limited to what is “reasonably necessary” to the purpose for litigation so that donators are not misled.
Although the Committee was able to decide on some limitations and loose guidelines for lawyers and crowdfunding, it is important to remember that every state has its own rules of professionalism that could change the outcome of these cases. Since this is a newer area of client funding, there is little law directly applicable to the concept of crowdfunding. It seems that this method of client funding is just a new way to possibly violate the rules of professionalism in any given state. For example, serious problems with returning funds could arise if a client decides that he or she no longer wants to pursue litigation. In most cases, a lawyer would likely need to return the client funds from a retainer to the client. In that situation, the lawyer would not be able to do so because he may not be able to identify who the donators were and how much they donated, especially if they prefer to remain anonymous. Additionally, crowdfunding through online platforms such as GoFundMe and Kickstarter may seemingly be anonymous, however, there could still be confidentiality issues if someone is able to discover who has donated or discusses the cause through his or her social media platforms.
Crowdfunding may cause more ethical issues than rules of professionalism can directly address before a violation has occurred. Although this can be a great opportunity to fund litigation, lawyers should still be wary of how the rules of professionalism could apply in his or her state.
Student Bio: Jenna Connors is currently a 2L at Suffolk University Law School and a staff member of The Journal of High Technology Law interested in criminal defense. She holds a B.A. in political science from Assumption College.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
