Ezel / Ethics Opinions / DCBAR
DCBAR November 2018

Can a D.C. lawyer accept money raised through crowdfunding to pay for a client's legal fees, and what changes if the lawyer runs the campaign?

Short answer: The opinion concludes that lawyers may generally represent clients whose fees are crowdfunded. When the client runs the crowdfunding and the lawyer is merely aware of it, the lawyer takes on no special duties, though the opinion says the lawyer should consider counseling the client about the risks of disclosing confidential information. When the lawyer directs the crowdfunding, the third-party payment rule (Rule 1.8(e)) applies, and the lawyer must meet the rules on fee agreements, truthful communications with donors, and handling the money as client funds in trust until earned.

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This page answers the general question as of 2018. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 2018
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Opinion 375 (published November 2018) addresses whether and how lawyers may ethically raise, or accept, money raised through donation-based crowdfunding to pay for legal representation. The opinion limits itself to donation-based crowdfunding (where the donor gets no financial interest), not equity-based funding. Its organizing principle is that the ethical implications turn on the lawyer's level of involvement.

When the client runs the crowdfunding and the lawyer is merely aware of it, the opinion concludes the lawyer incurs no specific ethical obligations, because clients have always been able to pay with money collected from family and friends. The opinion notes, however, that the lawyer should be alert to heightened risks of fraud or money laundering, and (under Rule 2.1 and the confidentiality duty) should consider counseling the client about the wisdom of publicly sharing information about the matter, given the risk of waiving attorney-client privilege.

When the lawyer directs or controls the crowdfunding, the opinion concludes the lawyer takes on specific duties. Rule 1.8(e) (compensation from a third party) requires the client's informed consent, no interference with the lawyer's independent judgment (reinforced by Rule 5.4(c)), and protection of the client's confidential information; the lawyer may not let donors direct strategy or share client confidences with them. The opinion concludes a written fee agreement is strongly encouraged under Rule 1.5(b) because crowdfunding creates confusion over excess funds and shortfalls. Solicitations to donors must be truthful (Rule 4.1, Rule 8.4(c)) while protecting confidences, and the opinion recommends telling donors their gifts are nonrefundable, that they will not receive confidential information, and that they cannot control the lawyer's work. Finally, crowdfunds are client funds: they must be treated as advance fees held in trust under Rule 1.15(a) and (b) until earned, returned if unearned at the matter's end, and the opinion concludes a lawyer may not personally claim leftover unearned crowdfunds (unlike a contingent fee, the lawyer bears no offsetting risk), which would risk an unreasonable fee under Rule 1.5(a).

In practice

Under the D.C. rules as they stood at the time of the opinion, a lawyer whose client independently runs a crowdfunding campaign takes on no special duties beyond ordinary practice, though the opinion says the lawyer should watch for fraud or money-laundering signs and consider advising the client about the confidentiality and privilege risks of public disclosure. The opinion concludes that a lawyer who instead directs the campaign must satisfy Rule 1.8(e) (informed consent, no interference with independent judgment, protection of confidences), keep donors from steering the representation, and avoid sharing client confidences with them.

The opinion concludes such a lawyer should use a written fee agreement addressing excess funds and shortfalls (Rule 1.5(b)), keep solicitations truthful, and treat the money as client funds held in trust under Rule 1.15 until earned, returning any unearned balance at the end. It also concludes the lawyer may not keep leftover unearned crowdfunds. Because the opinion predates later rule developments, verify the current D.C. rules before relying on specific requirements.

Common questions

Q: Can a D.C. lawyer accept money a client raised through a crowdfunding site?

A: The opinion concludes yes. When the client runs the campaign and the lawyer is merely aware of it, the lawyer takes on no specific ethical obligations, though the opinion says the lawyer should consider counseling the client about disclosure risks.

Q: What changes if the lawyer runs the crowdfunding campaign?

A: The opinion concludes the lawyer must comply with Rule 1.8(e) for third-party payments: the client's informed consent, no interference with the lawyer's independent judgment, and protection of the client's confidential information.

Q: How must the lawyer handle the crowdfunded money?

A: The opinion concludes crowdfunds are client funds and must be treated as advance fees held in trust under Rule 1.15(a) and (b) until earned, with any unearned portion returned to the client when the matter concludes.

Q: Can the lawyer keep leftover money that was raised but not earned?

A: No. The opinion concludes it would be unethical for the lawyer to personally claim unearned crowdfunds, because the lawyer bears no offsetting risk as in a contingent fee, and doing so risks an unreasonable fee under Rule 1.5(a).

Q: Can donors get updates on the client's case?

A: The opinion concludes the lawyer may not voluntarily share the client's confidential information with donors, and recommends telling contributors up front that they will not receive confidential information and cannot control the representation.

Background and rules framework

The opinion interprets D.C. Rule 1.8(e) (compensation from someone other than the client), read with Rule 5.4(c) (professional independence), Rule 1.5 (fees, including the writing requirement of 1.5(b) and reasonableness under 1.5(a)), Rule 1.6 (confidentiality), Rule 1.15 (safekeeping client property; advance fees in trust), Rule 1.4 (communication), Rule 2.1 (advisor), Rule 4.1 and Rule 8.4(c) (truthfulness). It builds on D.C. Opinion 355 (handling advance and flat fees).

Citations and references

Rules of Professional Conduct:

  • D.C. RPC 1.8(e) / Model Rule 1.8 (third-party compensation)
  • D.C. RPC 5.4(c) / Model Rule 5.4 (professional independence)
  • D.C. RPC 1.5(a), (b) / Model Rule 1.5 (reasonable fees; writing requirement)
  • D.C. RPC 1.6 / Model Rule 1.6 (confidentiality)
  • D.C. RPC 1.15(a), (b) / Model Rule 1.15 (advance fees held in trust)
  • D.C. RPC 2.1, 4.1, 8.4(c) / Model Rules 2.1, 4.1, 8.4 (advisor; truthfulness)

Other opinions cited:

  • D.C. Bar Legal Ethics Op. 355: handling advance and flat fees

See also

Source

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