Can a Colorado lawyer be paid through a crowdfunding campaign, and what are the ethical limits when the lawyer runs the campaign instead of the client?

Plain-English summary

Opinion 150 addresses the ethical issues that arise when a crowdfunding platform is used to raise money for a client's attorney fees and costs, covering both the case where the client starts the campaign and the case where the lawyer does. The Committee frames crowdfunding as a form of third-party payment and routes the analysis through the Rules that govern third-party payors: Colo. RPC 1.8(f) (a lawyer may accept payment from someone other than the client only with the client's informed consent, no interference with the lawyer's independent judgment or the client-lawyer relationship, and protection of information under Rule 1.6) and Colo. RPC 5.4(c) (a payor may not direct or regulate the lawyer's professional judgment). The opinion stresses that contributors get no right to direct the representation and no entitlement to confidential information, and it advises stating that on the campaign page.

The opinion separates two fact patterns. In Fact Pattern 1, client-sponsored crowdfunding, the client creates and manages the campaign and the lawyer has no control; the Committee treats this as analogous to a client receiving money from a family member, the scenario that "presents the fewest concerns for the lawyer." Even so, the lawyer must not disclose information relating to the representation without informed consent under Rule 1.6(a), should caution the client that public statements on the platform can waive confidentiality, attorney-client privilege, or the Fifth Amendment privilege, and must avoid assisting conduct the lawyer knows is criminal or fraudulent under Rule 1.2(d) (for example, a client soliciting funds for legal fees but diverting them to personal use).

In Fact Pattern 2, lawyer-sponsored crowdfunding, the lawyer creates and manages the campaign. The opinion calls this scenario, while "not presumptively unethical," one that is "rife with the potential for the lawyer to run afoul of the Rules." Here the lawyer must obtain the client's written informed consent to the third-party arrangement (drawing on CBA Formal Op. 129), make no misrepresentation about use of funds under Rules 4.1(a) and 8.4(c), and observe the fee and trust rules: funds raised are unearned client property under Rule 1.5(f) and must be held in a trust account under Rules 1.15A and 1.15B and recorded under Rule 1.15D, transferred from the platform "as soon as practicable," with earned amounts paid out promptly. The opinion addresses excess funds (the lawyer generally cannot keep funds above a reasonable fee under Rule 1.5(a), and any public statement about excess or charitable use must be honored), platform usage fees (the client must agree in writing to bear them, and a lawyer who absorbs them as overhead cannot let the platform deduct them from client funds), and any administration fee the lawyer charges, which triggers the business-transaction safeguards of Rule 1.8(a).

In practice

Under this opinion, a Colorado lawyer may be paid through crowdfunding in either fact pattern, but the binding obligations come from the existing third-party-payor, confidentiality, fee, and trust-account Rules rather than from any rule specific to crowdfunding. The opinion holds that the lawyer must keep contributors from directing the representation (Rules 1.8(f), 5.4(c)), must not place information relating to the representation on the platform without the client's informed consent (Rule 1.6(a)), and must treat raised funds as client property held in trust until earned (Rules 1.5(f), 1.15A, 1.15B, 1.15D). It concludes the client-managed campaign is the lower-risk arrangement and states a lawyer "can minimize the risk of running afoul of the Rules by allowing the client to manage the crowdfunding campaign." Where the lawyer runs the campaign, the opinion adds written informed consent to the third-party arrangement, accuracy about use of funds under Rules 4.1(a) and 8.4(c), and Rule 1.8(a) compliance for any administration fee.

Common questions

Q: Is it ethical for a Colorado lawyer to be paid with crowdfunded money?

A: Yes. The opinion concludes crowdfunding to pay legal fees is not presumptively unethical in either the client-sponsored or lawyer-sponsored fact pattern, provided the lawyer satisfies the third-party-payor rules (Colo. RPC 1.8(f) and 5.4(c)) and the related confidentiality, fee, and trust requirements.

Q: Is it safer for the client or the lawyer to run the campaign?

A: The client. The opinion describes client-sponsored crowdfunding as the scenario that "presents the fewest concerns for the lawyer" and says a lawyer can minimize risk by letting the client manage the campaign; lawyer-sponsored campaigns are "rife with the potential" for rule violations because the lawyer's added control raises confidentiality, misrepresentation, and Rule 1.2(d) exposure.

Q: Where does crowdfunded money go before the lawyer is paid?

A: Into trust. The opinion treats funds raised as unearned client property under Rule 1.5(f) that must be transferred from the platform to a trust account under Rules 1.15A and 1.15B as soon as practicable, recorded under Rule 1.15D, with earned portions paid out promptly so client funds stay separate from the lawyer's.

Q: What happens if the campaign raises more than the fees and costs?

A: The lawyer generally cannot keep the excess. The opinion explains that under Rule 1.5(a) a lawyer may not collect an unreasonable fee, so excess funds may be retained only if the representation would justify a greater, reasonable fee and the client agrees; otherwise the public statement on the platform about how excess funds will be handled controls.

Q: Can the lawyer let the platform take its processing fee out of the donations?

A: Only with the client's written agreement to bear those fees. The opinion says the platform's fees may be charged to the client if the client agrees in writing, but if the lawyer instead absorbs them as overhead, the lawyer cannot allow the platform to deduct them before transfer, because the full amount raised is client property that must reach the trust account.

Background and rules framework

The opinion interprets the Colorado Rules of Professional Conduct as applied to crowdfunding. The core framework is the third-party-payor structure of Colo. RPC 1.8(f) and 5.4(c), read with the informed-consent definition in Rule 1.0(e) and the communication duties of Rule 1.4 and 1.5(b)(1). Confidentiality runs through Rule 1.6(a) and its broad scope under Comment [3]. The misconduct and truthfulness limits come from Rules 1.2(d), 4.1(a), and 8.4(c), with Rule 3.6 noted for trial-publicity concerns. The fee and property rules are Rule 1.5(a) and (f) and Rules 1.15A through 1.15E, and any administration fee the lawyer charges is governed by the business-transaction rule, Rule 1.8(a).

Citations and references

Rules of Professional Conduct:

• Colo. RPC 1.8(f) and 5.4(c) / Model Rules 1.8, 5.4 (third-party payment; professional independence)
• Colo. RPC 1.6(a) / Model Rule 1.6 (confidentiality of information relating to the representation)
• Colo. RPC 1.5(a), 1.5(f), and 1.15A-1.15E / Model Rules 1.5, 1.15 (reasonable fees; unearned fees; safekeeping property)
• Colo. RPC 1.2(d), 4.1(a), 8.4(c) / Model Rules 1.2, 4.1, 8.4 (no assisting crime/fraud; truthfulness; misconduct)
• Colo. RPC 1.0(e), 1.4, 1.5(b)(1), 1.8(a), 3.6 / Model Rules 1.0, 1.4, 1.5, 1.8, 3.6 (informed consent; communication; fee writing; business transactions; trial publicity)

Cases:

• People v. Isaac, 470 P.3d 837 (Colo. O.P.D.J. 2016), client identity may be confidential
• People v. Albani, 276 P.3d 64 (Colo. O.P.D.J. 2011), scope of confidentiality
• People v. Hohertz, 102 P.3d 1019 (Colo. O.P.D.J. 2004), scope of confidentiality

Other opinions cited:

• CBA Formal Op. 129 (2017): ethical duties of a lawyer paid by one other than the client
• CBA Formal Op. 130 (2018): online posting and sharing of materials relating to the representation
• CBA Formal Op. 99 (1997): use of credit cards to pay for legal services
• D.C. Ethics Op. 375 (2018): ethical considerations of crowdfunding
• New Hampshire Bar Ethics Op. 2021-22/02 (2022): crowdfunding for legal fees and costs
• ABA Formal Op. 480 (2018): confidentiality and public commentary; ABA Formal Op. 484 (2018): financing the lawyer's fee

See also

• CBA Formal Op. 129: Third-Party Payment of Fees
• CBA Formal Op. 141: Data Breach Duties
• No sibling crowdfunding opinions from other bars yet indexed.

Source

• Landing page: https://www.cobar.org/ethicsopinions
• Original PDF: https://www.cobar.org/Portals/COBAR/Repository/ethicsOpinions/150 Crowdfunding Opinion_edited (clean).pdf