The Ethics of Crowdfunding, Revisited Posted on 04/27/2015

When we last visited the subject of crowdfunding in January, I pointed out some of the ethical barriers to this method of fund

raising. While much depends on the lawyer, crowdfunding could implicate:

Improper communications concerning a lawyer’s services – Oregon RPC 7.1

Dishonesty, fraud, deceit – Oregon RPC 8.4

Fee sharing with a nonlawyer – Oregon RPC 5.4

I also noted that money raised via crowdfunding may well be taxable, even if the lawyer did not meet the minimum threshold to

trigger a 1099.

This month I join forces with the venerable Amber Hollister, Assistant General Counsel of the Oregon State Bar. We have co-

authored an article for the OSB Bulletin entitled “Crowdfunding Your Law Practice.” The article is scheduled for publication in

the May issue.

In addition to the above, we identified other troublesome ethics concerns:

Potential third payment and trust accounting issues – If you are rewarding donors with a legal consultation in exchange

for a donation and receive funds in advance or a donor is construed as “buying” a legal consultation for a third party, be

sure to comply with all trust accounting rules.

Conflicts of interest are also a concern. If a consultation is offered as a “perk or reward” in exchange for a donation, will

the lawyer be able to perform? Lawyers would be well-advised to forewarn donors of the necessity of conflict screening.

Running afoul of the rule prohibiting the lawyer from giving something of value in exchange for recommending the

lawyer’s services – lawyers can’t give enthusiastic donors anything of value for promoting the lawyer’s crowdfunding

campaign via social media.

None of this is shared to discourage Oregon lawyers from crowdfunding. Rather, you need to go in with your eyes open and be

sure you are tuned in to the ethics issues. For a thorough analysis of this subject, refer to the article.

[All Rights Reserved 2015 Beverly Michaelis]