Litigation Crowdfunding and How it Advances Social Justice

You don’t have to be a lawyer to know that money plays a major role in whether people have the ability to pursue legal action. In addition to attorney fees, litigants often have to pay for investigations, subpoenas, witness preparation processes, court costs, and myriad other expenses.

Due to these notoriously high fees, many individuals or companies have no choice but to defer or abandon legitimate cases. To that end, it’s not uncommon for defendants to deliberately resist negotiations under the knowledge that the plaintiff cannot afford protracted litigation.

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One solution to this massive inequality within the justice system is litigation crowdfunding, an increasingly popular concept for advancing social justice.

What is litigation crowdfunding?

Litigation crowdfunding is a relatively new method of financing a lawsuit. With the help of an online crowdfunding platform (e.g. GoFundMe, Kickstarter, etc.), the plaintiff asks members of the public to contribute to the various fees associated with litigation. Plaintiffs can also ask the public to contribute to their living expenses, so they can continue providing for their families while litigation plays out.

If the claim succeeds, contributors are rewarded with a portion of the judgment or settlement money. If the plaintiff loses, the funders get nothing. Despite the risk, litigation crowdfunding has the potential to bring justice to those who would otherwise not be able to afford legal services, as does more traditional litigation funding. However, there are various differences between litigation funding and litigation crowdfunding.

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Litigation crowdfunding vs. litigation funding

The most noticeable difference between litigation crowdfunding and traditional litigation funding is that crowdfunding typically involves a large group of funders, whereas funding typically involves a single third-party investor. As a result, litigation crowdfunding tends to solicit fairly small sums of money from each individual contributor.

With this in mind, it’s important to note that traditional litigation funding is usually only available for accredited investors. Depending on the platform, litigation crowdfunding can solicit funds from accredited investors or laypeople. The crowdfunding platform CrowdJustice, for example, is open to contributions from any member of the public.

Moreover, litigation crowdfunding can come in the form of donations, in which donors receive nothing in return for their contributions. In 2018, the “TIME’S UP” Legal Defense Fund raised more than $24 million from more than 21,000 donors via a GoFundMe page. By contrast, litigation funding was designed to serve as an investment strategy, so the primary purpose is to make money.

Outside of this circumstantial difference, the rules for both forms of financing are very similar. Litigants are only required to repay their funders if the settlement or judgment is successful, and cannot be held liable for failed litigation.

How can litigation crowdfunding advance social justice?

While litigation crowdfunding and litigation funding can both be lucrative, litigation crowdfunding is often more motivated by social justice than financial gain. This is primarily because litigation crowdfunding has the potential to solicit contributions from first-time investors and concerned citizens, as opposed to financial professionals looking to diversify their portfolios and capitalize on sizable settlements or judgments.

For this reason, litigation crowdfunding is perhaps best suited for cases stemming from particularly compelling or tragic events, aka “human interest” cases. Contributions may be rooted in the desire to prevent a powerful defendant from getting away with causing immense harm to an individual or community. For instance, the aforementioned GoFundMe page has since enabled the “TIME’S UP” Legal Defense Fund to finance more than 200 sexual harassment and related retaliation cases.

Though many of these harassment cases involved wealthy defendants as well as mounting expenses from multiple legal processes (arbitrations, depositions, etc.), litigation crowdfunding is a sensible method of financing a case of virtually any size.

Crowdfunding both large and small cases

Since making money isn’t necessarily a top priority for contributors, a plaintiff might turn to litigation crowdfunding to finance a small case that isn’t positioned for a considerably lucrative outcome. This could be a case that may have otherwise been dismissed by reputable lawyers due to the plaintiff’s limited funds.

Similarly, with smaller cases, the plaintiff would likely have a difficult time attracting the interest of third-party investors, most of whom only invest in cases offering large returns. However, a group of concerned citizens might jump at the opportunity to help a victim of injustice or further a cause that aligns with their values. After all, a small case doesn’t always revolve around a “small” wrongdoing.

Conversely, litigation crowdfunding can also finance larger cases that third-party investors might view as too risky. Though a single investor might be deterred by the uncertainty of a trial’s outcome or timeline, litigation crowdfunding would spread this financial risk across a group of people. This can make litigation crowdfunding an effective resource against a defendant with the means to intentionally delay a case, drawing out the litigation for an extended period of time. Litigation crowdfunding would level the financial playing field and prevent the plaintiff from succumbing to a costly war of attrition.

A legal system for everyone

Countless business ventures that initially struggled to materialize have since been brought to fruition through crowdfunding. In the coming years, we could be seeing the same thing with lawsuits.

Litigation crowdfunding stands to dramatically expand access to the legal system and ultimately allow more cases to be decided on merit, as opposed to which party has the deeper pockets. It’s up to aspiring plaintiffs to gauge the depth of their neighbors’ commitment to social justice by harnessing one of the most valuable skills in the legal realm: the ability to tell a good story.

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