Can Joe help David beat Goliath?

In 2014, new kids on the block –litigation crowdfunders – made a splash in the litigation funding industry.  You may recall a San Francisco pro bono case we previously discussed in this space in which the plaintiff turned to crowdfunding to finance its attorney fees.  We observed then that crowdfunding pro bono matters allowed interested members of the public to help parties they deemed worthy obtain “access to justice” and their day in court. 

Over the past year, the litigation finance industry has gained momentum and established a growing presence in the U.S. legal landscape.  With increased awareness and understanding of the benefits of litigation funding, new funding products and services are being introduced to the market.  Taking advantage of this increased awareness and diversification in products, as well as the omnipresence of social media platforms, companies such as LexShares and Invest4Justice are attempting to bring crowdfunding to litigation funding.  Crowdfunding companies like these appear to focus on relatively small matters where the damages do not typically exceed $1 million, but the defendants can be large, well-funded and well-represented corporations.  Crowdfunding these types of cases allows “Joe Public” the opportunity to help “David” hold “Goliath” accountable.

It is not surprising then that the usual suspects who loudly complain about third party litigation funders in general are also complaining about litigation crowdfunding.  Among the predictable and unsupportable complaints are that crowdfunding will:  encourage an influx of frivolous claims that will clog over-burdened courts; undercut parties’ control of litigation; and unnecessarily prolong the lifespan of cases.  These rehashed arguments sound like a broken record.  While there are many potential pitfalls for parties and investors that, for example, fail to properly conduct due diligence, after many years, there is no evidence, statistical or otherwise, to validate the anguished complaints of the adversaries of litigation funding.  Like litigation funding in general, investors, parties and counsel that properly investigate potential claims will likely find that crowdfunding is a useful litigation finance tool to help those parties with meritorious claims obtain access to justice. 

Whether a particular case tugs at the heartstrings of the public or ignites a desire to seek fairness for the claimant, there is now a tool in the marketplace that allows for the general public to invest in matters they believe in.  It remains to be seen, however, whether this type of financial product will gain traction as a desired investment tool for Joe Public.