Creatively Finance Legal Matters with Crowdfunding
Crowdfunding has become commonplace in our society. With websites like Patreon, artists have raised revenue streams that elicit monthly support from those willing to offer it. While many fields are taking advantage of or even evolving crowdfunding, the legal sector seems to have a blind spot where the tool is concerned.
Crowdfunding of legal matters is not unheard of. However, its immense potential has been far from realized to its fullest extent.
That said, there are both legal and ethical concerns placed on fundraising methods for legal matters that other industries are not required to worry about.
All the same, this should not deter law firms or clients from making use of crowdfunding as a tool. The same ethical rules that govern other legal fundraising methods already provide a roadmap of how to navigate any potential issues.
Crowdfunding Basics
Crowdfunding is a relatively recent buzzword for a practice that goes back about as far as business itself. The interconnectivity provided by the internet has just given it a 21st-century facelift.
The process of crowdfunding requires three components: someone to create a project they want to be funded, people who want to support the project, and a platform that organizes information and facilitates communication and transaction between the two.
Legal Intricacies
The tech field has had incredible success in funding projects using crowdfunding. A smartwatch company was able to raise around $9 million with the final product as an incentive to potential backers.
However, both national and state bar associations and attorney regulators have rules dictating how attorneys’ fees can be billed and paid. What they do not have are specific prohibitions on lawyers collecting attorneys’ fees via crowdfunding.
This means that so long as it doesn’t violate any of the existing rules of ethics governing attorneys’ fees or representation, crowdfunding is as viable a fundraising tool for a legal matter as any of the traditional methods.
Tell a Good Story
Outside of campaigns that just happen to feature an amazing product, the most successful crowdfunding results come from campaigns that tell compelling stories.
The legal field is all about telling compelling stories. Legal matters typically have ramifications beyond just the people directly involved in them. Finding a way to capture the public interest is a tried and true method of garnering moral support. Now, it can be used to garner some financial support as well.
Obviously, this approach is better tailored to some areas of practice than others. Still, very few issues are genuinely unique to one singular person. If the client is sympathetic, let that tell the story. If the matter itself is relatable, position your campaign as fighting the good fight now, before it becomes everyone’s problem.
Social media will be a huge help in this arena. Pew Research Center estimates a staggering 62% of adults use social media as their news source (for better or for worse). If you can crack the Newsfeed of the masses, you’ve opened yourself up to eyes you would have never even thought to solicit. This is no secret, it is the reason most crowdfunding platforms interface with social media sites so seamlessly.
Access to Representation
Money is probably the most prohibitive aspect of widespread access to effective legal representation around the world, but especially in the United States. As crowdfunding has increased general public access to the tech and entertainment industry, there is no reason it can’t similarly enhance the general public access to justice as well.
Loans are how firms have traditionally bankrolled matters and projects they may feel passionate about but do not have the independent funding to pursue. Some clients even turn to offering stake in their claims as a method of soliciting litigation financing.
The legal sector is primed for a better method of fundraising for both law firms and potential clients.
Crowdfunding can offer this access without placing the financial burden of funding a project or matter on the shoulders of a few. By spreading the financial responsibilities, clients how would have otherwise gone without can seek justice and attorneys have more latitude to pursue issues they feel are important in representing the client.
Ethical Concerns
As mentioned above, the rules are a little different when it comes to fundraising for a legal matter. Some of the changes are minor, but some of them are more profound.
For instance, a crowdfunding project for a legal matter would need to have a disclaimer that makes it clear that support would not entitle the donor to any compensation despite the fact that law firms are for-profit entities.
Adding a disclaimer is easy enough. What could be difficult is navigating the intricacies of confidentiality and disclosure when trying to solicit support on social media.
The client may not want their personal business broadcast all across the internet, regardless of how beneficial it might be. If that is the case, as an attorney you are ethically bound to respect those wishes.
Removing the social media aspect of crowdfunding to maintain confidentiality renders many of the most popular crowdfunding sites more or less useless to your causes. It is ABA Model Rule 1.6 that specifically requires informed consent on client information disclosure. You can try to plead your case to your client, but if they don’t budge, you’ll have to rethink your strategy.
There are additional concerns when it comes to third-party funding arrangements that must be addressed as well. ABA Model Rule 5.4 specifically bars attorneys from sharing legal fees with non-lawyers. Lawyers are not even allowed to form partnerships with non-lawyers if the basis of partnership entails the practice of law.
This rule can make offering equity as an incentive for a crowdfunding campaign a nonstarter in the overwhelming majority of the United States.
The only place it may be allowable is Washington D.C., where non-lawyers are allowed to own stake in a law firm for the purposes of maintaining lobbying interests.
Yet another potential hurdle for crowdfunding legal matters comes in the form of raising too much money. Law firms are only allowed to charge a “reasonable fee” for their services – as stated explicitly by ABA Model Rule 1.5. If the reasonable fee for a matter is X and a crowdfunding campaign raises XYZ, it would be unethical for the law firm to keep the additional Y and Z.
Fortunately, there are crowdfunding platforms designed specifically for crowdfunding legal matters. These platforms can either cap contributions at a certain rate or provide other avenues for any of the financial overflow.
This is done by keeping all the donations in a trust that is dispersed at the conclusion of the matter. That way, the appropriate amount can be used to settle up the legal fees and whatever’s left can be allocated accordingly.
Conclusion
Crowdfunding offers a tool to pay for matters or projects that would otherwise be neglected.
For those with trepidations about the ethical concerns, existing ethical rules already light the way to maintain compliance. So long as you make sure your crowdfunding initiative operates inside of these guidelines, there is no reason not to take advantage of these fundraising platforms.
