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Personal Fundraising and Crowdfunding – New Resources For Legal Fees

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In my line of work , I’m accustomed to clients – generally a group of neighbors or a community association – taking up a collection or hosting a gala to fund my fees. But in the past week, two potentially new sources for funding legal fees came across my radar: Facebook’s introduction of Personal Fundraisers that individuals can use to collect funds for “critical financial needs” and CrowdJustice , whose founder, Julia Salasky was recently featured in an interview with Edward Sohn at Above the Law.

Facebook’s platform initially doesn’t directly authorize payment for legal funds. Instead, the six categories for which users can raise money are education, human or pet medical costs, crisis relief, personal emergencies and funeral and loss. Once Facebook automates the process for approving funding campaigns, it plans to add other categories. Moreover, a user could attempt to justify a legal expense as related to one of the approved categories – for example, rather than paying for the cost of a medical procedure that an insurer denied, it could be argued that paying a lawyer to reverse the insurer’s decision is a more cost-effective way to attain the same goal.

By contrast, CrowdJustice is built specifically to gather funding from legal cases that attract or inspire a larger community. Some of the more successful campaigns  have involved immigration (no surprise) or opposition to Virginia redistricting.

Both Facebook and Crowdjustice charge a fee for these services. Crowd justice takes  around 8 percent – 5 percent for platform fee and the rest for processing charges; on Facebook, a 6.9 percent + $.30 fee go towards payment processing fees.

Lawyers need to keep ethics issues in mind – even if the clients rather than the lawyer raises the money. For example, lawyers should advise clients who wish to use Facebook to collect funds that they should be cautious about how much information they disclose to avoid breaching attorney-client privilege or simply oversharing with their opponents.

And of course, if lawyers decide to use the CrowdJustice site to collect funds directly for the benefit of the client, other ethics obligations are triggered. Regulators often treat third party funds as client property which must be held in a trust account . And while the funds collected are to be applied to the lawyers fee and do not comprise the fee itself, the CrowdJustice platform should evade accusations of fee-splitting – though whenever state regulators are involved, who can say for sure?. In any event, CrowdJustice has developed a mechanism to make it easier for attorneys to use the site to for the benefit of clients.

Ultimately, the problem with personal fundraising and crowdsourcing is that if everyone begins passing the hat for their favorite legal cause, potential donors become desensitized to these requests – much in the way that many of us might ignore persistent beggars lined up along a city block. But I don’t think we’ve yet reached a saturation point, so for now, Facebook Personal Fundraising and CrowdJustice remain potential options for lawyers and their clients to pursue to fund a case.