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Please enter a legal issue and/or a location Crowdfund Student Loan Debt, Commit Ethics Violation?

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By William Peacock, Esq. on May 29, 2013 12:01 PM

I was skimming my second-favorite law blog this morning, and ran across an interesting post by Elie Mystal on, a crowdfunding site where "Upstarts" sell their soul pledge a percentage of their income for the next ten years in exchange for present-day funding. The gist is "give me money now, and if I don't fail at life, I'll give you a percentage of my income, per my tax filings, for the next ten years."

It's a nice concept, and could pay off if you back a winner. Plus, who needs student loan debt relief more than lawyers?

Sure enough, there are a number of JDs on there, including at least one, Alan Tauber, that wants to start an appellate law firm. He has all of the credentials: multiple publications in law reviews, co-authored an amicus brief in a landmark case, and he graduated in the top 20 percent of his class at George Washington University School of Law.

Assuming his appellate advocacy skills match his pedigree, he should be able to run a successful law firm, even if, as Mystal points out, appellate firms don’t exactly make it rain.

There’s still one big issue: fee splitting.

I may be wrong (that’s often the case), but wouldn’t the model rules prohibit an arrangement where backers fund a law firm and get a cut of the firm’s income?

Model Rule 5.4, “Professional Independence of a Lawyer” prohibits fee-sharing with nonlawyers except:

  • Sharing with the estate of a deceased lawyer;
  • Sharing, as part of a compensation plan, with employees;
  • Sharing court-awarded fees with a nonprofit that made the case referral;

Now, presumably, he’d be sharing his income rather than the firm’s income, but that’s a narrow distinction if he operates as a sole practitioner.

While crowdfunding sites are one of the bigger trends today, with backers funding everything from smartwatches to someone’s birthday party, if the funding will be used to open a legal practice, and a percentage of your income has to be kicked back to your backers, it might be worth your time to consult with your state bar’s ethics committee first.

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