Crowdfund the Kraken!

Over the weekend, mythical sea creature /(probably) soon-to-be-sanctioned lawyer Sidney Powell announced that she was joining a legal team to aid who she termed “political prisoners” (people who are accused of participating in the January 6 insurrection and are now in jail).

While, okay, everyone deserves a defense, what caught my eye was that this announcement was, of course, attached to a request for donations to Powell’s 501(c)(4). It is not clear whether donations would actually go to some sort of legal defense fund, some other project of the organization, or anywhere else.

This blog isn’t about politics so I’m not going to dive down that rabbit hole (except to remind Ms. Powell that 8.4(c) is a 24/7 law and misleading donors can get her sanctioned just as readily as misleading clients). So instead I’ll talk about crowdfunding legal fees.

“Crowdfunding” is a practice of turning to the Internet and soliciting small contributions toward a goal, either through a platform like GoFundMe or more traditional social media. Medical expenses and business start-ups are commonly crowdfunded. Increasingly, legal matters are, too. But is this acceptable?

Generally, yes. As I’ve written before, Model Rules and their state equivalents tend to lag behind technical developments, so there is not a ton of formal, binding guidance on whether a lawyer can be involved in crowdfunding litigation. Wisconsin has not formally weighed in on the issue, but State Bar Ethics Counsel Aviva Kaiser did recently. She concluded that how perilous a crowdfunding path may get is dependent on the level of involvement from the lawyer.

Clients may crowdfund on their own. It is, of course, legal for clients to raise funds on their own through lawful means; often, they borrow money from their parents or tap into a joint account. Kaiser, referencing formal opinions from the Philadelphia and DC Bars, stated that you can ethically accept fees crowdfunded by your client (this portion of the article assumes you know that your clients are crowdfunding), but you need to be careful that the funds were indeed sourced legally, and you should counsel your client about the risks that disclosing your legal woes online (specifically, inadvertent waiver of privilege).

When lawyers are directly involved in the crowdfunding, it gets a little slipperier. Several rules are implicated here—in Wisconsin, these include SCR 20:1.8(f) (which imposes requirements for accepting funds from third parties); SCR 20:1.6 (confidentiality); SCR 20:1.5 (particularly the provisions about communicating a fee, handling unearned fees, and handling refunds); and SCR 20:4.1 , 7.1, and 8.4(c) (yep, truthfulness again). Kaiser also warns lawyers who manage crowdfunding to keep a close eye on it, and have a plan for ending a campaign once funding is sufficient.

As I sit here, I have no idea whether Sidney Powell has considered these factors (or for that matter has actual, direct involvement in her organization’s fundraising; the links I have seen were all from third parties). But surely, if you’re considering or already using crowdfunding in your practice, you’re going to be a bit more careful than she has been, right?